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Tellurian (TELL) stock analysis: Hard to SWAN with this one

By: Invezz
natural gas price

Tellurian (TELL) stock price has been in a freefall, leading to over $2.6 billion in losses to long-term investors. The shares peaked at $11.8 in February 2019 and has now plunged to $0.56. This plunge has brought the company’s total market cap to just $361 million.

Charif Souki and the fight to save TELL

Tellurian is an energy company that was established in 2016 by Charif Souki, one of the best-known people in the Liquified Natural Gas (LNG) industry. He is a respected figure who started Cheniere Energy, a large company valued at over $28 billion.

He started Tellurian after he was pushed out by Carl Icahn, the embattled billionaire. Tellurian’s goal was to play an important role in the LNG industry by building a giant Driftwood terminal in Louisiana. 

Recently, however, these hopes have been dashed as the cost of building the plant have risen and some of the initial buying partners have abandoned. Companies like Vitol, Shell, Total, and Petronet have backed out of the project.

Souki himself is not doing well as his personal finances have dwindled. UBS has taken and dumped some of his shares and also auctioned some of his assets, including Tango, a yacht. It is also in an attempt to sell a large luxury ranch he owns in Colorado.

Worse, Tellurian has issued a going concern report, warning that it could go bankrupt. At the same time, the tumbling natural gas prices are not helping. Prices have crashed in the past five straight weeks and they remain 75% below the highest point in 2023.

Tellurian needs billions of dollars to build and run the Driftwood project, funds that it lacks. In an interview with FT, Souki said that the company had access to about $9 billion of the $13 billion it needs for its Driftwood project. He added that:

“We’re highly confident that there’s other mezzanine financiers who will come in. So $2bn from equity partners. It’s not going to be very hard.”

Still, at this point, it will take a miracle for Tellurian to survive since it needs billions of dollars that it does not have. In its going concern document, the company said that it had just $59.3 million in cash as of September 30th. It believes that these funds are inadequate to last it in the next 12 months.

Is it safe to invest in Tellurian stock?Tellurian

TELL chart by TradingView

I believe that long-term investors should focus on companies that will help them Sleep Well at Night (SWAN). As Warren Buffett recommends, these should be companies with stable revenues and those with strong free cash flows. As I wrote in my COWZ article, free cash flow is the best measure for a company since it refers to funds that return after everything.

In Tellurian’s case, the company has minimal revenues, is in the natural gas industry that is struggling, and it needs loads of cash. This means that it is a high-risk, high-reward company. If it raises the funds it needs for Driftwood, then the stock will surge. 

On the other hand, as we have just seen with Troika Media Group, investing in a company that issues a going concern statement is risky. As such, it is extremely difficult to SWAN with Tellurian, making it a risky investment.

The post Tellurian (TELL) stock analysis: Hard to SWAN with this one appeared first on Invezz

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