Macro Tsimmis

intelligently hedged investment

Transmeridian (TMY) update #22

Posted by intelledgement on Wed, 11 Jun 08

Chinese money has won the day in Kazakhstan, and if our expectations about the value of the South Alibek field there—the rights to which are owned by Transmeridian (TMY), our depressed E&P play—are anywhere near accurate, the Hong Kong-based United Energy Group Limited (UEG) has pulled off a coup, snapping up a 60% interest in the company for $215MM.

According to the press release, the deal must still be approved by TMY shareholders, but with the alternative a death spiral, most likely beggars won’t presume to be choosers here. Presuming the deal is consummated, there would be about 293MM shares outstanding when UEG converts the preferred stock they would be getting to common, and they would have paid about $1.23/share. The stock zoomed up 33% in the last half hour of trading today after the announcement to close at 53 cents/share, so there is most likely more room to the upside here, although given the company’s recent history of announcing deals that don’t happen, we’d be surprized to see the stock approach anywhere near $1.23 until the deal actually closes.

Our basis is $3.30, so for us it’s just a matter of cutting our losses. Still, worthwhile to hold here for that prospect.

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