December 10th next Monday is the deadline for the Canadian government to announce its decision on the controversial Nexen Cnooc deal. Today Nexen's shares surged into the close on rumors a decision will be announced tomorrow after the market close. A lot of commentators have speculated that the deal should be approved, although there is still a meaningful 10% risk spread implying significant doubt.
The government is in a no win situation, because supporters and opponents are almost evenly split, and both sides have valid arguments. And this certainly won't be the last, because for sure other Canadian resource companies, being undervalued and underfunded as they are, will continue to attract foreign buyers.
Which begs me to wonder, what would the Talismans and Nexens and Progress Energies be like if the government did not eviscerate the energy income trust sector in 2006? During those times, a lot of investors, domestic and foreign, were bidding up Canadian energy trusts and in the process created one of the biggest sectors in the financial markets. Progress Energy used to be an energy trust and Nexen monetized its chemicals business by turning it into a business income trust. Would the Canadian energy companies be as undervalued and vulnerable today, if this invaluable source of capital was still there, before the government destroyed it?
No comments:
Post a Comment