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Xebec 1Q22 schedule, plus VIRT and other trade notes ?3

13:26 28-Apr-22


Xebec has scheduled its first quarter report for the morning of May 12th.  A half dozen analysts expect the company to lose 4 Canadian cents per share from CAD43.7M, increasing to CAD45.9M this quarter.  It's too early to see results from the recent CCS order, so I'm not sure what to expect from this report.  However, the rebate rate remains well above 100%, which is not sustainable for the long term.

In the meantime, hydrocarbon prices continue to be all over the place as Germany prepares to stop buying Russian oil, thereby allowing the E.U. to move towards a full scale embargo.  I continue to see New Fortress as ideally positioned for this environment, and Shell proceeding on the Brazilian development it bought at the end of last year is a positive sign.

I also note that Virtu benefited from market making in commodities, and that volatility was slow to ramp and has only increased since March.  VIRT has traded down 13%, as low as $29.27.  Management and analysts once again made a big deal about regulators.  I can't say for sure whether or not this suits the former's purposes, with $488.4M remaining in buyback authorization.  Nor can I promise that the share price will jump back quickly, but I still see it as a gross misstep.  Equity options wholesaling should be a growth lever, and MeMX is targeting a fourth quarter launch that should certainly support this initiative.  My own take is that regulators are an annoyance that may impose incremental reporting costs at worst.  Most of their efforts seem to target crypto and distributed finance, as well as much needed attempts to rein in bad actors.  With Advance GDP already signaling the first step in recession, I think the value and negative index correlation embodied by VIRT far outweighs the retreat of swarm traders and regulatory speed bumps.  The long options cycle between the April 15th and May 20th expiration is allowing for some extreme prices.  Patience will be required to take advantage of them.