PTT Exploration and Production (OTCPK: PEXNY) (SET: PTTEP) stock has jumped 400% on the OTC. PEXNY stock also seems to have absolutely no reason for doing so. We can see no news or announcements out there. Sure, that could be an issue with our skill at looking for them. But we think not at least. Quite the most confusing aspect here is that the underlying stock in Thailand seems not to have changed. Certainly, not to anything like the same extent.
PTT Exploration is a gas and petroleum company in Thailand. Mostly oil exploration and gas pipelines although there is drilling for natural gas as well. Usually described as a “national” company, given the state involvement but outside capital is involved - thus the stock market quotations. There are the two different listings, in Thailand and also on the OTC market in the US.
That's this morning's (ie, Tuesday, 6am London Time) quote and it's most certainly not showing any great excitement. Nor is it up 400%.
PTT Exploration stock price from Thai Stock ExchangeNote that that is up 400% until close last night, then falls substantially and rises again after hours. Trade is low - 71k pieces of stock as opposed to 2 million on the Thai exchange.
As far as we can see there is no news to explain this in the slightest. One thing we would assume is that there has not been a change in the ratio of PTTEP to PEXNY because if that were the cause then we would expect the price change to have come in the one jump, not spread over the day like that.
Our conclusion is simply that some speculation is taking place in the OTC stock, PEXNY. Which has become entirely divorced from the value of the underlying, PTTEP. The obvious trade here is to buy PTTEP and sell PEXNY in the same proportion (making sure to cover for any difference in the ADR ratio, if there is one. Given prices before this speculation we would guess at 3 Thai stock to 1 OTC but that is a guess based purely on prices and FX rates).
PTT Exploration and Production stock price from NASDAQ Or on OTCWhether this entirely works depends upon whether the two stocks are fully fungible, something it's not possible to determine at this time of day. Of course, it's also possible to simply lock in the relative prices with that trade but that would mean having to finance both sides - and that short position on the OTC could become very expensive to hold if this bull market returns for a while.
The real point here is that there is - given that PTT Exploration and PTT Exploration are the same company - some logical connection between the two quotes, PETTP and PEXNY. At present those two prices have wildly diverged - the bet has to be that they will converge again. The specific trade to take advantage of this depends upon those technical details of being able to short on the OTC (and being able to finance) plus the fungibility of the two stocks.
But price differences make arbitrages and this one is large enough to drive a truck through. So, back up that truck and fill up.
