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Xebec changes and short follow-ups ?3

15:19 13-Jul-22


Xebec has just announced that it is cutting 13% of its North American workforce and has streamlined production to focus Quebec manufacturing PSA (Pressure Swing Adsorption) units while its Denver facility makes the containerized Biostreams.  XEBEF is down a couple of percent so far to trade near 4-year lows around 60 cents.

Both the Canadian dollar and euro rebounded slightly after this morning's CPI report, but those moves are not significant in the face of the YtD weakness which is hurting foreign stocks.  Still, this signals that we're not yet at a market capitulation.  The rebate rate on XEBEF remains over 100% and I see cost control as a necessary step after all the acquisitions that Xebec has made.

The rebate rate on PSNY is also still around 100% and I note the availability of weekly options, which typically has a vaguely inflationary effect on the underlying equity.  Before anyone asks, HIMX still has a rebate rate of 2%.  For all of these stocks, counter-market movement (up when the indexes are down and vice versa) is to be expected as a sign of short seller stress.  However, the PSNY trading situation looks a lot more like IPO hedging than true shorting.  I don't expect any dramatic movement there until Polestar brings its SUV to market in the fourth quarter or announces something more dramatic than what we read this morning.  In the meantime, I'm optimistic about the lack of detail on the new models as that leaves room to incorporate updated battery technology.  Polestar's asset light model remains its main advantage, though, as Xebec is not the only company laying off workers.  Even Google is slowing down as it loses the Netflix advertising opportunity to Microsoft.  GOOG shares are down 2% so far ahead their impending post-split pricing.