I
initiated a position in Tesoro (TSO) in early November for dual purposes of potential pullback in crude oil pricing (which should help refiners margins) and
tender offer at $64 per share by Tracinda. After spiking off the tender offer the stock sunk back to $56, which is where I bought. This indicated the market somehow doubted this would go through and lo and behold, at least in the near term, once again the market knows better. Tesoro promptly adopted a '
poison pill' provision which will make it harder for Tracinda to carry out plans and agitate for initiatives that will help push the price up. Further, they might
just abandon the plan to tender part of the company at $64.
- Investor Kirk Kerkorian's Tracinda Corp on Monday said that refiner Tesoro Corp's (TSO) decision to adopt a "poison pill" shareholder rights plan could jeopardize its offer to buy 16 percent of Tesoro's shares.
- Tracinda launched an attempt last month to buy up to 21.9 million shares at $64 a share, a nearly 12 percent premium over where the shares were then trading. If completed, the tender offer would bring Tracinda's total stake in the company to 19.98 percent.
- Tesoro adopted the rights plan last week. The plan would make it more costly and complicated for Kerkorian to launch a hostile bid for the refiner.
- Tracinda said it believes the rights plan significantly limits opportunities to enhance stockholder value and has a material adverse effect on the value of Tesoro's common shares.
While I still like the space due to potential of crude oil pricing to pull back, my favorite name is
Frontier Oil (FTO), and
Tesoro (TSO) was more of a play on the Tracinda bid. Since that part of the thesis is looking weaker by the day, I am going to cut back my position by about half from 525 to 250 shares. This brings Tesoro down to a 1.3% position; this sale is roughly $55 so a $1 loss per share from my entry point and helps to raise $15K for other buys. I will monitor the situation further and from a technical standpoint, one would want the stock to hold $54, the 50 day moving average. If not, the stock could weaken considerably, and it will be time to exit completely for now.
Long Tesoro, Frontier Oil in fund; no personal positions
