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Option1307 (30.12)

A Sure Bet, Great Northern Iron

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December 28, 2010 – Comments (5) | RELATED TICKERS: GNI

It's not often that you know the ultimate outcome of an investment before investing in said equity. However, that is precisely the case when it comes to Great Northern Iron (GNI).

GNI will cease to exist on April 6th, 2015, no "ifs", "ands", or "buts" about it. It's that simple, any remaining assets of GNI will be transferred to Glacier Park Company, a wholly owned subsidiary of ConocoPhillips at the time with current shareholders receiving essentially nothing.

So let me get this straight, GNI is a $140 stock that is guaranteed to be worth $0 come April 6th, 2015. Seriously? What in the hell people?

TMFDeej first alerted me to this play way back in May, 2010. See here. So you can thank him for the eventual “free” Caps points.

However Citron Research just wrote it up today (see here) and had this to say,

“You absolutely won’t believe this:  A stock that is going to die, for certain.   100% guaranteed — a veritable ghost ship of a stock. No fraud, no deception, no fad.  Simply a huge oversight by the market.

Why is this stock different from every other stock? One simple fact: In exactly 4 years and 3 months, it goes away. Period.”

I realize that iron ore is a vital metal in regards to a lot of building activities so if the world economy recovers strongly it would likely continue to push up the iron ore commodity itself and thus GNI. However, iron ore has already risen substantially the last year to the point that it has basically doubled in price in the last 9 months and now sits just below an all time high (here). This is definitely ahead of world demand imo. Throw into the mix the fact that China may be slowing and/or falling in the near future and you can bet that iron ore doesn’t continue to set new all time highs going forward.

What this all adds up to is a great time to short GNI after the rapid rise in stock price and the underlying commodity itself.

GNI is a low volume stock and only has 1.5M shares outstanding so it will be somewhat difficult to short in real life, but it makes a great Caps play nonetheless.

 

 

 

 

5 Comments – Post Your Own

#1) On December 28, 2010 at 11:11 PM, Option1307 (30.12) wrote:

I suppose I should mention that I currently do not have any real life position in GNI and likely won't anytime soon. I will probably short it on Caps though in the very near future.

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#2) On December 29, 2010 at 12:13 AM, nuf2bdangrus (< 20) wrote:

The stock is not optionable, and likely not easy to borrow....so this would be a CAPS pick only for everyone not priviliged

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#3) On December 29, 2010 at 12:24 AM, Option1307 (30.12) wrote:

and likely not easy to borrow

Yep, agreed. One of the reasons why I likely wont play it in real life.

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#4) On December 29, 2010 at 2:42 AM, checklist34 (99.73) wrote:

great post.  i will attempt to borrow shares and report

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#5) On December 29, 2010 at 10:28 AM, Option1307 (30.12) wrote:

Thanks checkilst!

After the initial drop in price, stocks mentioned by Cintron Research tend to rebound a bit so you might want to wait before shorting this. Although since this is somewhat of a commodity play and shares are probably going to be tough to come by you might not have that option.

Best of luck and I'd be very interested to know how things play our for you.

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