Houston, Texas – Hundreds of U.S. energy companies are starting a new trend of shorting their own stock as a hedge against their broken business model. “With oil prices near historical lows its nearly impossible to run a cash flow positive business,” a C-Suite executive at an unnamed publicly traded energy company stated. “The industry is beginning to realize that shorting our own stock is the best economic chance we have at surviving this mess.”
Short selling a stock essentially is a way to profit from when your stock price falls. With oil prices near historical lows energy companies have begun to realize how profitable it is to short their own stock.
“Shorting our own stock is a way to hedge our own mistakes and we make a lot of mistakes,” an E&P senior executive stated. “I have no clue how the equity in my company has not fallen to under $1.00/share. At $10 bucks per share we are 100% short our own company today. We are only looking to do high return on capital projects and shorting our own stock has a tremendous return on capital.”
Some energy companies have even taken to shorting their peers. “We are short OXY, XOM, HAL and TRP. We’re pretty much short the entire industry.”
With Q1 in the books, it is clear how profitable shorting your own stock has been for these companies. Gains on investments in â€˜other income’ has magnified to unheard of levels. Some gains are even higher than the last ten years of cumulative EBITDA.
“We have a ticker symbol of our stock price that flashes in the conference room,” an executive at an unnamed energy company stated. “Everyday the stock is down we pop champagne. We are making more money shorting our own equity than we ever had operating these useless assets.”