We think the EXR selldown is temporary - in fact we have seen...

We think the EXR selldown is temporary - in fact we have seen quite a few of our portfolio stocks bounce back from recent dips from general market weakness during May - we share a few of them further down in this note.

EXRs announced their second drill team spudded their first well on the 27th May, and results should be out any day now, where we hope a good result will be a catalyst for the share price to return to pre placement levels.

So why the share price weakness?

1,400 shareholders participated in EXRs’ Share Purchase Plan (SPP) which raised $16.6M at 36c/share. This adds to the $10M raised from institutions (also at 36c/share) and the $9M in bank EXR already had according to the last quarterly.

We understand some people like to sell after a SPP to make a small profit, and nobody likes a drilling event that doesn’t deliver (looking at you Cracker1-S…) even if it’s just one of many.

We guess some SPP participants might have been worried about seeing a paper loss once the price went below 36c and chose to sell their position worrying that the price would continue to fall...which then may have caused more selling as paper losses looked worse and worse for other holders - a vicious cycle but one that can quickly reverse once selling is finished...

On the 27th May, the undesirable result on the Cracker 1-S exploration well exacerbated the selling situation, and it seems many holders felt like the share price had more to fall and sold.

But whenever there is a seller there is a buyer on the other side, so there is definitely a few people out there picking up shares for under 36c - which is a better price than $10M of institutional “smart money” that came in a few weeks ago AND $16.6M of 36c SPP money.

Congrats to anyone who read the post placement selling for what it was and bought the dip (especially if EXR keeps going up).

There is certainly a lot in the news pipeline for EXR to look forward to, as they deploy their $36M across two drill teams - there is likely to be news every two weeks with news from the current drilling expected any day now.

We think that the placement and SPP selling is almost done given the back to back price rises over the last few days - just in time for EXR to start releasing updates on its many other upcoming wells. In fact there is a well being drilled right now.

EXR has been one of the best performing stocks in our portfolio, hitting success in 10 out of 12 holes so far.

In our opinion, the share price got unfairly smashed after the SPP and Cracker 1-S result, even though EXR is funded to drill dozens more wells.

It seems those who don’t like seeing a paper loss have now left the building and EXR’s share price is back on the march again to reflect anticipation of upcoming newsflow.

With nearly $18M shares changing hands since the SPP shares came out and the Cracker 1-S result scaring off short termers, we expect this was enough volume to have absorbed most hot money and short term sellers:

We are long term holders, but understand that each individual has different circumstances and investment strategies, so appreciate that some people will exit after a placement or if they perceive a news event to be the “final straw” for them to sell.

As long term holders we just ride out the waves and try not to get caught up in the weekly ups and downs, we are here to see what happens on the other end of the dozens of wells that are about to be drilled.

We think the selling has mostly washed through now but there might be some resistance at 36c if some people are holding just to get back above water on the SPP and then sell...

On the other hand, if everyone who wants to be out is already out then it might breeze through 36c - we will see.

Bear traps in our portfolio

Investopedia defines a bear trap as a technical pattern that occurs when the performance of a stock incorrectly signals a reversal of a rising price trend. The trap is thus a false reversal of a declining price trend.

We are long term holders, so we try not to get too worried about short term share price fluctuations, but also admit it can be scary when one of our holdings goes into a rapid drop, like has happened with EXR over the last few weeks - and in fact most other small cap stocks during the market weakness seen in May.

With May thankfully behind us and the market starting to show signs of being buoyant again, we are glad to see most of our portfolio stocks that experienced a share price hiccup are bouncing back and glad we held on.

We expect EXR to make a strong comeback over the next few months IF they deliver some good results, the first of which is due any day.