SLW Conversion Commentary

On Wednesday night I contacted Bogart Beck about raising the upper-level circuit breakers on CapEx in expectation of heavy trading the following day. I was right.

I'm not gloating too much - it doesn't take a great leap of logic to see that people are scared of SLW and will hold on to just about any other security in order to get rid of the possibility of having them. That's what's pushing CapEx prices up currently. Investors aren't trading Linden dollars anymore - they're trading SLW shares for other shares, and trying to get the best rate they can. Although JTF/CapEx has fixed a price target of L$1.03 for SLW, investors clearly aren't buying that.

I closely watch the SLR stock price, so I'm going to use it for an example. For the past few months, it's been creeping up from L$0.50 to L$0.75, and throughout January has held pretty steady around L$0.75. Today, however, it hit L$1.20. That's an increase of 60%! To me, that's not an increase in the value of SLR, but rather a decrease in the value of SLW. Since we know the share value of SLW is supposed to be L$1.03, we can solve to find out what these traders are valuing SLW at (maximum):

L$0.75 / x = L$1.20

x = L$0.625

These buyers are putting the SLW value at less than L$0.63 each. Looks like the market is expecting a panic...but we already knew that. You can't even read the CapEx forums now without some head-in-the-sand noob screaming "I WNAT MY MONEYS BACK!!! NOW!!!" I even heard a trader in CapEx today claiming that he was going to buy some BTR in hopes of selling it quickly at L$75.00 each. Market forces quickly brought the ask prices back in line, dashing the hopes of this trader, but it still served as an example to me of how confused these traders can get.

But let's stop keeping pace with the market at this point. Let's step up our pace and think one or two steps ahead of the general traders. We know the market is expecting a crash, and I've heard several big players say that they'll happily buy up cheap SLW shares from these fools. I may even throw in a few lowball bid offers in hopes of downward spikes. Those big players may keep SLW above the catastropic predictions and calculations the market is currently generating.

Also, everything I can see says that people are already ditching their SLW - they're just doing it by buying other stocks. That shrinks the supply of SLW shares available from the most active traders, which is another upward thrust for SLW prices. I still think it'll fall below L$1.00 in a heartbeat, but maybe it won't go so low as the calculation above suggests.

These traders and bank depositors want their cash. I suspect they'll take a hit to get to it. But they're not holding SLW shares anymore - they're holding some of their favorite company, or maybe every company. Therefore, I expect the drop in prices to be more severe among other CapEx companies than SLW, at least after the major spikes stabilize. How severe? I'm not sure, but bargain investors will find a huge sale going on at the CapEx next week.

So how do you make money in this market? I've been placing high sell orders on all my stocks and I'm preparing to hold SLW shares until prices stabilize. All orders should be canceled at the conversion, so there is no harm in placing them. Once SLW prices are steady, it should just be a matter of cashing out.

Unless, of course, something unexpected happens.