(Idea) New Stratus Energy - Noboa Wins And The Sacha Deal Will Go Forward
It's been a tumultuous month.
Since our write-up on NSE.V on March 3, titled "New Stratus Energy—The Ultimate Oil Beta, " the stock price sold off from C$0.50 to C$0.21.
Several factors explained the sell-off:
Ecuador's presidential election was on April 13.
Noboa publicly set an impossible-to-meet deadline and fended off opposition forces (from attacking the Sacha deal).
In the meantime, investors had to deal with the Trump tariff war and the uncertainty looming over the Ecuador presidential election.
As a result, the stock priced in no deal. And it was understandably so. Investors didn't want to take the risk of buying a microcap like NSE. The stock is illiquid, the deal was uncertain, and the election risk was a coin toss. Who likes odds like that?
But as we explained in an article titled, "An Asymmetric Election Bet." There was ample of margin of safety for investors to take a position.
The election odds were heavily mispriced. Our analysis indicated a much higher probability of Noboa winning.
The stock price traded down to a level that practically priced in 1) no Noboa victory and 2) no deal.
As a result, investors were left with an asymmetric bet.
Now, fast forwarding to today, I can breathe a sigh of relief that Noboa won the presidential election.
With 93.59% of the votes in, Noboa holds a lead of 11.7%. This is statistically impossible to overcome, so while a victory hasn't been formally announced, it's time to update you on the next steps.
Stock Price Reaction
In many ways, NSE's stock price was trading similar to the Polymarket odds for Ecuador's Presidential Election. You can practically overlap the two charts to see how incidental the two traded:
When Noboa didn't win outright following the 1st election, NSE's stock price sold-off from C$0.48 down to C$0.34. Later, the stock rallied on the prospects of the Sacha oil deal before falling back to C$0.21.
Given that Noboa has won outright and the next 4 years are locked, NSE's stock will likely re-rate back to C$0.50 to C$0.60.
Investors that did not take the election risk will likely have to pay that price range in exchange for the higher deal certainty.