Last year, I wrote about an interesting warrant opportunity on a de-SPAC - Brooge energy (BROG is the common, BROGW is the warrants). They operate an oil storage terminal in the UAE and based on expansion plans, the warrants looked promising as a swing-for-the-fences opportunity, and to be fair (to anyone dumb enough to listen to what I write on here), I did note that it was a high risk play.
On 5/31/22, Brooge issued a 6K in which they disclosed a SEC investigation -
“The Company has not been able to file the 2021 Form 20F due to an ongoing nonpublic examination being conducted by the SEC regarding the financial statements of the Company. The Company is cooperating with the SEC fully.” I noticed the filing today (6/1/22).
I subsequently closed out my common shares at ~-10% and 80% of my warrants at ~-30% (the remaining warrants are a <1% position (cringing while typing that as if I’m some sort of real investment manager)). I have no idea what an “examination” means but it doesn’t sound good for a Cayman-domiciled UAE-based company. Additionally, the Chief Financial Officer departed on April 27, 2022 (“his contract was not renewed”) - where there’s a lot of smoke there might very well be an oil terminal fire.
(Apologies for the lack of embedded links for the 6k’s noted above - but for anyone curious about the source documents, here is the investor relations page and the investigation disclosure is in the 5/31 6k and the CFO departure is in the 4/29 6k).
I’ll be keeping my eye on BROG / BROGW - perhaps its a nothingburger and I panic-sold; perhaps it’s medium-bad and shares/warrants get cut in half but the original thesis (of the buildout of Phase III potentially providing 10x (now 25x and if prices crash, perhaps greater) returns remains intact; but CFO departure + SEC investigation + sketchy situation to begin with is pretty much as “red flag” as it gets.
Unfortunately there are no options on BROG so there’s no way to buy puts (since it seems like the market has not yet digested this news, to the extent it might care) and I didn’t even want to look into shorting - avoiding is much better for peace of mind.
You win some, you lose some - this one’s sadly a loss for now - but with the general market coming back a bit, hopefully there will be some less baggy long opportunities to write about in short order.
Regretfully,
Elmer
I actually purchased a few warrants, after reading your original post. Obviously, I'm not ecstatic about what's happened, but am grateful for you writing this post and "fessing up" to your error.
I fully recognize that this was an investment with a high risk. Traders like Stan Druckenmiller admit that they are right only ~51% of the time, so what hope is there for mere mortals like us?