Hafnia Long, Rec Silicon Short

I wrote here on our new long Hafnia position this week. I enclose Pareto comment on Hafnia from this morning.

I enclose a thesis on Rec Silicon Short. We sold shares short yesterday.

Pareto comment on Hafnia:

HAFNI NO – HAFNI: Another day of significant increases in Asian MR-rates, up 10-15% and have now doubled over the past week.. USD 40,000/day for non-eco ships, and this rise is the steepest we have seen ever since Russia invaded Ukraine. Clearly tight markets there with many ships positioning themselves for a tight Atlantic market post Feb 5th. Hafnia gambled on that and kept most of their fleet in Asia, which now pays off handsomely. Still expect a tighter Atlantic though, with LRs now starting to move up as well. Time to be really bullish here again, NAV in HAFNI is NOK 65 and growing 10% per quarter..

Rec Silicon Short thesis

There are two main reasons to be short Rec Silicon.

  • Share issue imminent – The company will need to do around 100 million USD equity financing. With the off take agreement announced this week that resulted in 25% share price increase. The company may take advantage of the share price increase to raise capital – the financing could happen any day now.
  • Global silicon oversupply this year. The global silicion production should increase this year by at least 25%. Some analysts even talk about 70% production increase this year. The market will be oversupplied, which should not help the silicon price.

THe company needs to finance USD 270 million this year to be able to start the production. ON the top of this they will need to refinance USD 110 million bond issue maturing in April. A lot of funding needed in these markets.

Rec Silicon is a retail stock. Retail stocks tend to overshoot any good/or bad news and than fade it. The share price increased materially on the off-take agreement, and it has been slowly going down in the last two days. We shorted the stock yesterday in anticipation of the financing, that may come any day. Equity financing would decrease the stock price by 10-20%. Even if the share financing would not happen now the stock should be slowly decreasing anyway.

If the financing does not happen in a week or two. We will most likely close the short.

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The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.

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