Option1307 (30.51)

A Sure Bet, Great Northern Iron

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.