TL;DR
Sable Offshore’s supposed “deep value” is a mirage, built on risky assumptions and speculative hype, masking significant regulatory and operational hurdles that could leave investors stranded.
Story
“Sable Offshore: A Trump-Fueled Gamble?"\n\nThe recent buzz around Sable Offshore (SOC) raises eyebrows, not cheers. A story spun from regulatory arbitrage, executive orders, and a CEO swapping his private jet for company stock sounds more like a casino than a calculated investment.\n\nSOC’s premise hinges on Trump’s executive order, which aims to bypass California’s environmental regulations. While the order cites national security, the reality is far murkier. Remember the 2008 financial crisis? Deregulation fueled by narratives of economic growth often masks underlying risks. This echoes that same dangerous tune.\n\nThe claim that SOC trades at a fraction of its peers is misleading. A dormant oil field for a decade isn’t equivalent to an active one. Restarting production isn’t flipping a switch—it requires investment, time, and faces potential technical issues and cost overruns. Think of a rusty old car sitting in a garage for years—it may look valuable, but getting it roadworthy is a different story.\n\nThe CEO’s jet-for-shares trade, while portrayed as conviction, could be a calculated gamble to pump the stock, attracting retail investors while insiders cash out. Market manipulation isn’t new; we’ve seen this play out before, leading to devastating consequences.\n\nThe “short squeeze” narrative is equally suspect. While a short squeeze is possible, it’s not guaranteed. It’s more likely a pump-and-dump scheme designed to lure in unsuspecting investors, leaving them holding the bag when the hype fades.\n\nMoreover, the legal landscape is complex. Federal preemption is not absolute, and California’s legal challenges could tie the project up in courts for years. The speed of regulatory approval is a critical assumption, and delays can significantly impact profitability. Consider the sunk cost fallacy—throwing good money after bad in hopes of recouping initial investments.\n\nLastly, comparing SOC to other oil companies based solely on oil reserves is flawed. SOC’s reserves are stranded assets until they can be extracted and sold. It’s like valuing a gold mine based on the estimated gold content without considering the cost of mining it. This valuation gap, far from being an opportunity, is likely a reflection of the inherent risks.\n\nThis entire narrative feels eerily reminiscent of past speculative bubbles, driven by hype and fueled by social media. Remember the dot-com bubble? Investors poured money into companies with no profits, blinded by promises of future growth. This situation has all the hallmarks of a similar speculative frenzy.
Advice
Approach Sable Offshore with extreme caution. Don’t let hype and FOMO cloud your judgment. Conduct thorough due diligence, considering the regulatory, operational, and financial risks before investing. Remember, if it sounds too good to be true, it probably is.