I wouldn't say the placement means that much either way tbh. Insider trading is illegal which is what this would amount to, and there's plenty of examples of institutions losing big time, and options expiring unused to think there's some big conspiracy to make sure the II's come out on top. It's an often repeated statement on bulletin boards that II's are 'in the know'- but there's never any hard evidence to support this view. A bit like the 'MM's are manipulating the stock' theory (note that this theory is only dragged out when the stock is going down, not up).
For a relevant example of an institution losing out- look at MHL (Monitor Energy), the company that was supposed to take 90% of Trinidad. They have constantly been backed by institutions, funding raising after fund raising- yet they are a failed stock that has delivered no value to shareholders. Institutions lost the most in the 2008 stock market crash. What about the guys who funded Range at 17p? What about the institution that funded Desire Petroleum (AIM: DES) with a placing at 140p, while awaiting drilling results? That well failed, and DES is now at 19p. Not saying that will happen to Range, but the theory that institutions know all the important information in advance is one I wholeheartedly do not believe.
It's hard to know just why an institution would invest in a company, but jumping to the conclusion they've been tipped off isn't the most likely possibility at all. An FSA investigation for insider trading and the closure of the fund is far too big a risk to take just for the sake of turning a quick buck on an AIM oil stock. Here's a few reasons just off the top of my head that are far more likely:
- They've invested in Range for portfolio diversification reasons, as part of their oil/gas exploration portfolio.
- They may have thought they were top-heavy in other sectors (i.e. mining, banking), and decided to rebalance the portfolio by allocating more money to the oil and gas sector, and this was then invested in Range.
- If it's a 'long only' fund, they may well have invested thinking of the very long term (i.e. 5 years+). Range is a pretty solid buy right now if you can hold on for years and years- this could be Socius's plan. Because of this, it doesn't matter too much to them if the next well is non-commercial. Remember, a hedge fund that delivers a return of 10% each year to clients would be considered a very good fund. In a couple of years if Range is 15p, they'll have made that return. And regardless of this well result, Range has every chance of reaching 15p in 2 years- which to Socius, would represent a good return on investment.
- Alternatively, the position might have been taken up as part of a short-term fund. Maybe they've looked at the risk/reward and consider Range a good gamble in the short term (that doesn't mean they 'know' anymore than anyone else- anyone invested in Range right now thinks it's a good gamble in the short term evidently, or they would sell out- but that doesn't mean they know anymore than anyone else). Remember to a large fund, $15m is peanuts. If they threw $15m at 5 oilers awaiting drilling results, and a couple of them were successful, they'd probably turn a profit even accounting for the ones that failed. Funds like that are all about risk and reward, and they might see this as a good price (but were unable to shift $15m in the normal market, so had to go for a placing at a premium).
The options aren't a 'safe' bet yet- if the first Georgia well is non-commercial this will almost certainly fall below 10c- which would make them expire worthless (if the SP isn't above 10c in December, there will be no options money- and no extra dilution either). Hence, the cash has to be secured now.
I'd personally just take the announcements at face value- Socius have invested $15m in order to fast track the Trinidad drilling, and the Georgia well is ongoing.
Besides, according to the announcement on the 28th September, Range were at 1452 metres. With a proposed TD of 3500m, there's no chance they'd know one way or the other whether hydrocarbons were present yet (oil 'pay zones' are only a few metres thick- not thousands of metres). The fact they only managed another 100 metres of drilling in the next two weeks suggests just what the announcement tells us- hard rock was hit, and they're unsure whether the well will be commercial or not yet, so more work needs to be done to find out.
No one knows yet. Not me, not Socius, not any posters on the boards, and not even the Range BoD. That's my opinion anyway.
RRS Price at posting:
15.0¢ Sentiment: None Disclosure: Not Held
