(B)(N) JE Just Energy Group Incorporated

Drama. The Just Energy Group Incorporated serves more than four million customers in the difficult and fickle business of retail low-cost energy. Its shareholders wrote down the stock by 13% on Friday and, of course, took similar losses from $10 to $8.50 with nearly 25 million shares (five to ten times the normal daily volume) of the 140 million shares outstanding changing hands because (evidently) the company missed analyst revenue expectations and reduced its expected dividend by 30% from $0.10 per share per month to about $0.07 per share per month for a reduction in yield from the astronomical 14% per year to the astronomical 10% per year in a prudent effort to save money, fund growth and build a cash reserve to pay down debt at maturity. And the company also announced that it wants to implement a shareholder rights plan that would act to defend the company and its shareholders against any unfriendly takeover offer, should there ever be one (The Canadian Press, February 8, 2013, Just Energy shares fall 13 per cent after energy retailer slashes dividend and Marketwire, February 7, 2013, Just Energy Group Inc. Adopts Shareholder Protection Rights Plan).

Should it not confuse the old shareholders at $12 per share or more (please see Exhibit 1 below) or the new shareholders at $8.50 per share that the company is still the same as it was last week or last year and has a negative net worth of minus ($500 million) and total liabilities of $2 billion which is about twice the current market value of $1.2 billion? One would think that the stock was “over sold” or touted based on the size of the dividend yield and investors did not think that the stock price for which there is no security might collapse by 30% in just one year even though examples of just one day are legion in the market.

In contrast, Just Energy was in the Perpetual Bond™ at prices between $8 and $14 for three years in 2009 through 2011 but we sold the last of our interest at $13.50 in 2011 because and only because the ambient stock prices summarized by the Stock Price (SP) (Red Line and the prices at which we buy, hold or sell the stock) dropped below the Risk Price (SF) (Black Line and also a step-function that only changes as new balance sheet information becomes generally available) and we understand exactly what we did and why we did it.

The Rights Offering if its accepted and approved by the shareholders at the next annual meeting in June will offer one common share equivalent for each common share outstanding and effectively increase or even double the cost of an acquisition. The current Risk Price (SF) is $13.50 and a provably fair price at which to acquire the entire company. Please see our Posts, The Price of Risk, August 2012, and The Nash Equilibrium & Its Stock Price, October 2012, for more information on what a stock price is – as something other than its current value, which, of course,  everybody knows at every instant of every day but which, apparently, doesn’t mean anything at all until we try to buy or control the whole company.

Exhibit 1: (B)(N) JE Just Energy Group Incorporated – Risk Price Chart

Just Energy Group Incorporated sells retail natural gas, electricity and green energy products to residential and commercial customers under long-term fixed-price, price-protected or variable-priced contracts and heater, furnace and air conditioner rentals and solar panel installations to nearly 4 million customers in Canada and the U.S. with plans to expand into the U.K. in July 2013.

(Please Click on the Chart to make it larger if required.)

The Company’s JustGreen® products provide consumers with the ability to help them reduce the environmental impact of their everyday energy use. Just Energy is the parent to Amigo Energy, Commerce Energy, Hudson Energy, Hudson Energy Solar, National Home Services, Momentis, Tara Energy and Terra Grain Fuels.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™
“Alpha-smart with 100% Capital Safety and 100% Liquidity”
Guaranteed
With No Fees and No Loads on Capital

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Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.