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The Peabody Energy Story

Updated on April 12, 2017
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Jack Lee, a retired engineer, worked at IBM for 28 years. He has traveled all over the world and has been an active investor for 10 years.

Introduction

In full disclosure, I am a current stockholder of Peabody Energy Corp. I have been an owner since 2015. The stock prices have declined from about $30 a share to now worthless. I only have 300 shares and decided to hold on and see what would happen. My worst fears have been realized. I have lost a total of $6000.

- Apr. 2017

The EPA and Obama Years

When President Obama came into office in 2009, he vowed to put coal plants out of business. By way of regulations through the EPA, he has made Carbon dioxide a target and a pollutant. The EPA issued tightened exhaustion limits on power plants that made it more expensive to burn coal. The demise of Peabody was written on the wall. Sooner or later, it would fail under government regulations.

Natural Gas

Natural gas is a cleaner burning fuel. It is also cheap with recent fracking technology. Some power plants have converted from coal to gas for those reasons. It is also a contributing factor in the decline of coal.

Chapter 11...

In 2016, after years of operating losses, Peabody finally filed for Chapter 11 bankrupcy. Negotiations were underway to save the company. It still holds tremendous assets around the world. Yet, it is doomed. The current condition was ripe and clear alternatives and price will determine the final outcome.

Stock Prices History - 5 years ($450 to 0.44)

Climate Change and War on Coal

There is no question that the war on coal is tied to climate change and the desire to reduce carbon dioxide emissions. In China where coal is abundant and very cheap, has also seen a decline due to climate change. It is a hard argument to make to poor farmer in remote areas of China that they need to stop using coal and pay more for alternative energy sources. They don't have the luxury of Europe or the United States.

The Trump Administration 2017

The surprise election of President Trump in the fall of 2016 gave Peabody and the coal industry a life line. The EPA has also been reigned back. Perhaps coal will make a come back. It is still too early to tell.

Summary

It may be too late for me. With the emergence of Peabody out of bankruptcy, the company is saved. Hopefully many jobs are saved as well. The real losers are the shareholders. Sometimes, only judges seems to know the right course of action. Or do they? I wonder.

Update 4/4/2017

The symbol BTUUQ is defunct. A new symbol BTU (original stock symbol) is now trading at $31.

How is this possible?

where is the SEC when you need them? Aren't they suppose to watch out for the small investor?

I received the following response after I filed a complaint to the SEC - 4/7/2017

"Thank you for contacting the U.S. Securities and Exchange Commission (SEC).

We appreciate you informing us of your concerns regarding Peabody Energy. The SEC’s Office of Investor Education and Advocacy processes many comments from individual investors and others. We keep records of the correspondence we receive in a searchable database that SEC staff may make use of in inspections, examinations, and investigations. In addition, some of the correspondence we receive is referred to other SEC offices and divisions for their review. If they have any questions or wish to respond directly to your comments, they will contact you.

For information about corporate bankruptcy and the SEC’s limited role in connection with bankruptcies, please carefully review our Investor Publication, What Every Investor Should Know: Corporate Bankruptcy, at https://www.sec.gov/investor/pubs/bankrupt.htm. Please also review our investor bulletin at https://www.investor.gov/additional-resources/news-alerts/alerts-bulletins/investor-bulletin-bankruptcy-public-company.

Thank you for communicating your views."...

Not much helpful information from the SEC.

The Moral of the Story...

In light of the response I received from the SEC, here is what you should all do. Whenever a company files for Chapter 11, liquidate all your holdings immediately. That is the only sure way to preserve the little value it holds.

Most of the times, the lawyers and big money changers will preserve the assets that is left and the stockholders are out in the cold.

This is a harsh lesson to learn.

Start of new BTU 4/4/2017

Last 5 days of BTUUQ

© 2017 Jack Lee

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    • Rock_nj profile image

      John Coviello 3 weeks ago from New Jersey

      Sorry about your investment loss.

      It would be interesting to know how coal would have done regardless of the EPA Clean Power rules. As you pointed out, cheap natural gas is also hurting coal. Some economists think cheap natural gas has been a much bigger factor in coal's decline than the regulatory environment.

      The reality is that many more Americans now work in renewable energy and energy efficiency in some capacity, from manufacturers to installers, than in the dwindling coal industry. Even the coal industry that remains is cutting back workers and using more machinery, as well as less labor-intensive mountain removal methods, which is causing losses for those employed in the coal sector.

      My advice... Do what my grandfather (who was trained as a blacksmith) did when the automobile made his blacksmithing skills largely obsolete, and get retrained to do something else.

    • jackclee lm profile image
      Author

      Jack Lee 3 weeks ago from Yorktown NY

      John,

      That's OK. I have other investments that did quite well and compensated for my loss. The problem with coal is what about those people in rural China? How can they survive in an coal free world imposed by the IPCC or the UN?

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