Apr 7, 2022 - George Lucas
I've been covering CEI, Camber Energy, Inc. for what seems like over a year and have done multiple deep dives into filings and their corporate structure with Viking entity. I'm going to look at a recent 8-k filing talking about the potential delisting of CEI and what to look out for as an investor. First I'll just touch on what an 8-k filing is, why it is useful, and the typical delisting process. Then we can dive into the actual SEC notice and finally, I'll provide my thoughts on the potential delisting.
(If you already know what an 8-k is, just ignore this part)
Form 8-K is used to update investors and the SEC about a significant event affecting a company. The stock price of the company is often affected by 8-K triggering events, but whether the price goes up or down depends on whether the form contains good or bad news. Naturally, less significant news will have less of a significant impact on stock prices.
Here's what happens when a stock is delisted. A company receives a warning from an exchange for being out of compliance. That warning comes with a deadline, and if the company has not remedied the issue by then, it is removed from the exchange and instead trades over the counter (OTC), meaning through a dealer network. The mechanics of trading the stock remain the same, as do the business's fundamentals.
You don't automatically lose money as an investor, but being delisted carries a stigma and is generally a sign that a company is bankrupt, near-bankrupt, or can't meet the exchange's minimum financial requirements for other reasons. Delisting also tends to prompt institutional investors to not continue to invest.
I provide my thoughts on the 8-k filing. Here is a link to the original 8-k filing
Item 3.01. Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.
Camber Energy, Inc. (the “Company”) is not in compliance with NYSE American LLC's (the “Exchange”) continued listing standards. Specifically, the Company is not in compliance with Section 134 and 1101 of the NYSE American Company Guide (the “Company Guide”) given the Company failed to timely file with the Securities and Exchange Commission (the “Filing Delinquency”) the following reports (collectively, the “Delayed Reports”): (i) Form 10-K for the 9-month transition period ended December 31, 2020; (ii) Form 10-Q for the period ended March 31, 2021; (iii) Form 10-Q for the period ended June 30, 2021; and (iv) Form 10-Q for the period ended September 30, 2021.
So it's been almost 1 year and a half for some of these filings. The 10-k (which is the annual financial report) and 10-Q (quarterly financial report) are missing for several periods.
The Company intended to remedy the Filing Delinquency on or before April 1, 2022, however due to certain circumstances requested the Exchange grant the Company an extension of time by which to file the Delayed Reports. The Exchange accepted the Company's request and has allowed the Company until May 20, 2022 to file the Delayed Reports. The Filing Delinquency will be cured via the filing of the Delayed Reports and the filing of the Company's annual report on Form 10-K for the period ended December 31, 2021 (collectively, the “Required Reports”).
So CEI was delinquent on April 1, 2022 (a few days ago) but the SEC is giving them extra time due to extenuating circumstances. this is likely due to the reverse merger with Viking as well as messy finances from the previous leadership.
If the Company is unable to cure the delinquency by May 20, 2022, Exchange staff will initiate delisting proceedings as appropriate. The Company may appeal a staff delisting determination in accordance with Section 1010 and Part 12 of the Company Guide.
CEI has already missed several deadlines, which to be fair is somewhat understandable considering the headaches of dealing with legacy accounting issues and mergers/restructuring. It also looks like there might be a chance to continue to delay the filing.
The Company is committed to filing the Required Reports to achieve compliance with the Exchange's requirements, and, although there are no guarantees it will do so, the Company expects to file the Required Reports on or before May 20, 2022.
There are multiple factors at play here but I'm going to try and simply do what I can and provide my thoughts.
1. If the finances are a complete mess and Camber Energy, Inc. valuation is substantially below the current valuation, market cap, and stock price - releasing the 10-k will be bad for CEI. This could be one of the reasons they are "delaying" the filing
2. Reviewing and updating messy financials is a complex process, especially with the multiple share structure CEI has, along with Viking Energy. It just takes time - and the CEO, James Doris, has been transparent about this process
I recently talked about the $100M investment and that should bring comfort to existing investors. If this institution did not feel confident about CEI or the leadership, I'm not sure if they would have committed to investing $100M To be clear, it is more nuanced than just the $100M investment, but I think this is a good sign.
Let me know your thoughts.