The Gambling Man
Robert Bugbee, Options Genius or Marketing Man?
Robert Bugbee is one of the industries most colorful and outspoken participants. A fixture on the ‘panel circuit’, he always provides entertainment and straight forward discussion.
He is also a perma-bull. When MRs are $8K a day, he is highly confident, sometimes without evidence but a gut feeling, that they will be $25K in short-order. When the market is $50K+, wait till you see what is next, this is the super cycle!
This has led to some tense moments with equity analysts over the years, with some growing tired of these bullish antics and moving away from Scorpio to other names.
As they say, a broken clock is right twice a day. Or if you make a market estimate, do not give a time frame. Many equity holders in the Scorpio family have been ridden and put away wet - while management got rich. With the recent 5x in STNG shares, so may forget that on a share adjusted basis STNG and the former Scorpio Bulkers are at a fraction of their IPO prices. Scorpio Bulkers was sold off at the bottom of the market for the energy transition. All of these decisions were controversial, which led Scorpio management to receive bottom barrel rankings in corporate governance.
So you may not have gotten rich if you bought the IPOs and rode the equity dilution. However, Mr. Bugbee is a bit of a gambling man. He is always active at the roulette table, the options market.
People always kind of chuckle at these announcements, thinking, does he make money on these? Is this just a marketing ploy? He never announces when he closes out.
So we decided to have a look.
In reviewing 20+ trades since 2019 it looks like if you make your bets when the market is low and stay consistent, your wins will outpace your losses.
With over $16M wagered during this period, this is no side hobby.
On August 11th and 12th of 2021, Scorpio announced that Mr. Bugbee acquired call options on an aggregate of 100,000 common shares (or 1,000 call option contracts) for $448K with a strike price of $15 expiring January 2023. The next day, they announced an additional 1,000 call option contracts for the same expiry.
In total, it was a $913,000 bet that the recovery was around the corner. The share at that time was trading at ~$15.60. At the money.
The stock traded up that fall before trading down during Omicron winter, where Mr. Bugbee made another bet acquiring 500 additional calls at a strike price of $10. The stock was trading at $12 and change, the bottom of the market. That $225k bet may have been exercised near $50/share!
As the market started to take off he didn’t hold back, spending $2.5M in May 2022 on Jan-2023 calls at $15. The share was at $26, deep in the money calls. Nevertheless, that gave him access to 220,100 common shares which were worth close to $11M by January expiry.
These bets were placed at a time when his 2021 bets were not looking so great. Between May and August 2021, Mr. Bugbee spent $5M on calls expiring Jan 2022 (Strike $24, $25, $23, $14).
He started when the share was ~$22 and layered on as it dropped to $14 in August. The last Jan 2022 bet was August 9, and it was August 11 and 12 when the legendary Jan 2023 bets were placed.
“Seldom right, but never in doubt”. Another saying, but not applicable in this case.
With a few disclaimers in that we do not know when the options were exercised, etc. And we also do not have access to private IRS filings to see if competitors stocks were shorted or puts were acquired, however there is an interesting article on that here: Execs Make Millions Trading Competitors Stock
In total Mr. Bugbee wagered ~$17M over this period and the share value had potential to be ~$30M (price of shares at expiry less cost to acquire at the strike price). A handy profit of ~$13M.
Ironically, had Mr. Bugbee acquired shares in STNG at the time he purchased each option, he could have accumulated over 900,000 shares which would be worth $50M at $55/share, a profit of $33M.
But the options definitely get better head lines!