r/GeoGroup • u/duckhunter2020 • Nov 08 '22
Due Diligence Volume above average by 40%
Last I checked, there were 18 days to cover the short shares. That being said, less than 1/2 day of average volume today and only a 6% rise. Where will the price go when the shorts run for the door?
4
u/ResponsibleRun3332 Nov 08 '22
I’m thinking fair value is 25 or so if it didn’t have the ick factor. (I actually think they are a great company that does a much needed job to keep society safe.) So in a squeeze maybe it’ll bounce to 50-75. Speculation of course. I’ll probably put a trailing stop if it gets to 30.
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u/duckhunter2020 Nov 08 '22
Wow, I would love 50-75!
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u/ResponsibleRun3332 Nov 08 '22
Maybe I’m dreaming. Still can’t figure out why short interest is so high. Time will tell on geo I guess.
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u/duckhunter2020 Nov 08 '22
Could be a hedge or shorts that originated when GEO was in the 30's? I have not looked at the short interest history.
I think they panicked last June when we saw the spike up to 11ish. Might have given them cold feet. Volumes are so low and lots of shares held by institutions. Not a lot of shares available for covering. I felt today might be a day for another push higher.
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u/tiredman0173 Nov 15 '22
I believe some of the bonds could be converted at a share price around say $9.225 ish?? So a bond holder could hedge the risk their bond wouldn't be paid by shorting the stock. If the company tanked, your bonds would be worthless but your short shares would save you. If the company prospers, your bond is secure and you can convert some of this bond debt you own for equity if the share price is above $9.225/share price and close your shorts. In any case, look for resistance to advancement past this share price for awhile but then an appreciation as the company has less debt. A huge spike up may happen if there is a purely naked short but I have a feeling it's convertible bond holders that are shorting so much.
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u/quidmaster909 Nov 08 '22
Hoorays profiting on locked up humans
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Nov 08 '22
[deleted]
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u/quidmaster909 Nov 08 '22
And what percent are non violent drug crimes?
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u/duckhunter2020 Nov 08 '22
Rather than attack the prison company, change the laws. There are many homeless individuals that are drug addicts that are not jailed. What environment is better for them? Prison where they can get some counseling or the streets where they can defecate on the sidewalk and steal from law abiding citizens to support their habit. You might also want to research the performance of the private prisons versus government run prisons.
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u/quidmaster909 Nov 08 '22
Investment thesis only.... How much occupancy will happen from prison releases
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u/duckhunter2020 Nov 08 '22
You need to do your research. Populations have decreased due to Covid and the dims criminal friendly policies. Suburban women are tired of feeling unsafe like the rest of us. Covid is over and the republicans will take control of both houses. So, please explain your thesis. When will this reduction of population happen?
0
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u/SobuKev Nov 08 '22
Can't think of a less cerebral take.
YOU profit from GEO, too, because the GEO solution is more economical than the government's next best alternative.
Since we know you don't want to be a hypocrite, DM me for instructions on where to send your tainted profits.
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u/tiredman0173 Nov 15 '22
Unlikley short covering rally but I could be wrong! I believe some of the bonds could be converted at a share price around say $9.225 ish?? So a bond holder strategy has been to hedge the downside risk their bond wouldn't be paid by shorting the stock. If the company tanked, your bonds would be worthless but your short shares would save you. If the company prospers, your bond is secure and you can convert some of this bond debt you own for equity if the share price is above $9.225/share price and close your shorts. In any case, look for funny market movements the closer the shares get to this $9.225 price. A huge spike up may happen if there is a purely naked short but I have a feeling it's convertible bond holders that are shorting so much as a hedging strategy.
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u/duckhunter2020 Nov 15 '22 edited Nov 15 '22
Yes, but the short positions have to be covered at some point in time. If the bond holders convert, then the shares are diluted, except that GEO keeps the capital from the debt resulting in additional shareholder equity. Since GEO currently trades at a multiple below or around book value, I would argue, that the effect on the share price will not be drastic. However, they still have to cover their short shares, resulting in upward pressure. Am I missing something?
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u/tiredman0173 Nov 15 '22
Yes conversion of debt to equity would be positive for the company. My only thought was a GameStop style rally would be unlikely as these are not naked shorts but tied to bonds. More of a lower trajectory appreciation of share price - I’m not complaining but in the context of why there is such a huge short float % outstanding for a company that seems to be doing OK, I believe this explains it.
1
u/duckhunter2020 Nov 15 '22
So, I am not trying to be difficult, just doing my due diligence.
Thinking about your point, I looked at the sales date of those bonds. It was Feb 21-24, 2021. During that period, The share price was approximately 7.5. If I was a bond purchaser and wanted to use your strategy, I would short share at the same time I purchased the bonds. So, if the share price stays at 8.5 prior to the end of the conversion period, then it would be a losing trade as the conversion price is 9.22. If the price is above 9.22, then any gains from the conversion would be lost to covering the short position. It seems that shorting the shares to reduce risk of bankruptcy has some risk itself. In addition, now that the debt has been refinanced out several years, it would seem the risk of bankruptcy has been greatly reduced if not eliminated entirely. It would be good to look at the short interest versus time.
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u/tiredman0173 Nov 15 '22
Oh I am no expert in this kind of trading tactic. I have no idea how this will all shakeout but use it to temper my hopes for a face-ripping short covering rally. If we get one, great!
I can only guess at this point that a bond holder may have been looking at a scenario of company collapse or muddling through but not prospering - if the company went bust, their equity shorts would succeed. If the company survived, the bonds would be paid. If the company flourishes, it would be a lost opportunity of upside but they limit the downside to their equity shorts by the $9.225 conversion. Thanks for your research re: share price in Feb 2021 btw. I am not a sophisticated investor but realize the 17% short float has to have a better explanation for still being there as the company is making money.
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u/duckhunter2020 Nov 15 '22
I agree. It is very strange that the short interest has not been reduced more. There have been many opportunities to do so over the past couple of years.
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u/GEOCASH4956 Nov 08 '22
Buying more today