Short-Selling Sends Walter Energy Higher

Michael Teague |

Shares for US-based metallurgical coal-producer Walter Energy (WLT) jumped nearly 5 percent on heavy trading Thursday to $14.40, with the assistance of the second-largest short float of the day in the industrial metals and mining industry at 35 percent.

The $861 million market-cap company is suffering from the same worsening predicament in which the entire coal industry currently finds itself. Indeed, coal producers face a number of challenges on both domestic and global fronts.

The recent shale boom in the US is a key factor, as large reserves are discovered on what seems to be a regular basis. Oil companies have been quick to the draw, with many reorienting their business strategies accordingly, and it is widely assumed that this will inevitably lead to lower gas and oil prices, which eventually undermine demand for coal.

On the international stage meanwhile, Australia has moved into the dominant position for the production and exportation of metallurgical coal used primarily in the steel industry.  Indeed, the country expects at least an 8 percent yearly growth rate for the commodity over the course of the next four years.

Finally, despite the numerous warnings about the various environmental dangers that could result from hydraulic fracturing process used to retrieve shale oil and gas, coal is commonly thought of as the dirtiest of the energy sources. The industry is also facing tough new EPA emissions regulations that many expect to be its swan song.

Given these considerations, as well as the company’s fundamentals; an operating margin over 10 percent in the negative, and a profit margin over 60 percent in the red, the short selling comes as no surprise. The stock has lost more than 60 percent of its value throughout the course of 2013.

 

 

WLT) jumped nearly 5 percent on heavy trading Thursday to $14.40, with the assistance of the second-largest short float of the day in the industrial metals and mining industry at 35 percent. The $861 million market-cap company is suffering from the predicament in which the entire industry currently finds itself. Indeed, coal producers face a number of challenges on both domestic and global fronts. The recent shale boom in the US is a key factor, as large reserves are discovered on what seems to be a regular basis. Oil companies have been quick to the draw, with many reorienting their business strategies accordingly, and it is widely assumed that this will inevitably lead to lower gas and oil prices, which eventually undermine demand for coal. On the international stage meanwhile, Australia has moved into the dominant position for the production and exportation of metallurgical coal used primarily in the steel industry. Indeed, the country expects at least an 8 percent yearly growth rate for the commodity over the course of the next four years. Finally, despite the numerous warnings about the various environmental dangers that could result from hydraulic fracturing process used to retrieve shale oil and gas, coal is commonly thought of as the dirtiest of the energy sources. The industry is also facing upcoming new EPA emissions regulations that many expect to be its swan song. Given these considerations, as well as the company’s fundamentals; an operating margin over 10 percent in the negative, and a profit margin over 60 percent in the red, the short selling comes as no surprise. The stock has lost more than 60 percent of its value throughout the course of 2013.">[Image Courtesy of Wikimedia Commons]

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Symbol Name Price Change % Volume
PROD Incorporated Productions 0.00 0.00 0.00 0

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