Payback is a bitch

After the ITC decision finding no injury, GSM (Ferroglobe)’s stock price has been in a death spiral. Now the long knives are out. There is talk of shareholder suits and even an FTC investigation into stock transactions prior to the decision.

In late February (, Feb. 26, Jefferies reported: “Grupo Villar Mir (GVM) filed Form 144 with the SEC mid-December 2017 indicating its intention to sell 2.39-million shares within 90 days. We understand sales commenced mid-January and should conclude soon, however, this has equated to roughly 80,000 shares per trading day of selling pressure.”

In addition, one major US silicon buyer reportedly stopped buying from GSM at the end of 2017 in reaction to the dumping suits.

The only outstanding case is in the EU, which was always considered problematic especially with the strong opposition. The EU is in the process of verifying the submissions and will announce preliminary findings and measures on Sept 19. If they don’t find dumping or injury by then, the company will probably withdraw their case, as is custom, because complainants usually don’t like to see an official declaration that they filed a frivolous case.

Still, there are a few supporters, mostly financial companies with ties to the producer. Oppenheimer wrote after the ITC decision: “We believe the market’s reaction to the ITC’s unfavorable ruling is overdone. We note US silicon metal prices are up ~28% from just before the preliminary duties were issued in 8/9/17, vs. ~20% for European silicon metal index. We thus deduce that US prices have moved up 8% (or ~$0.09/lb) related to the DoC ruling. GSM produces 137,000 mt of silicon metal in North America, which means the revenue/EBITDA impact would be $27/$27-million on our 2018E revenue/EBITDA of $2.5B/$480M. At a 10x multiple, this is a $1.50/share hit to the stock, vs. the current decline of ~$3.04 (the stock was recently trading at $11.48).”

Note: Since then GSM fell to $10.80 yesterday.

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GSM is undervalued, now trading at a 5X 2018 EV/EBITDA multiple.


$0.09/lb – do you think it’s a good estimation of price influence of ITC decision?

Moreover, USA monopoly expectations could also made almost 100% stock price rise last year. Not just EBITDA calculations.