The Motley Fool

The Camber Energy (CEI) share price dropped 50% yesterday! What’s going on?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Stack of British pound coins falling on list of share prices
Image source: Getty Images

Camber Energy (NYSEMKT:CEI) is a popular stock with retail investors. Over the past couple of months, the share price has jumped from lows in August of $0.33 to just under $5 last week. It’s up 115% year-on-year. The 50% slump down to $1.53 in a single day has caused even more commotion than the initial spike. There’s one clear reason for this, and a rather big one at that!

The rally before the crash

Camber Energy is an energy and power solutions company based in North America. It owns the majority of shares in the subsidiary Viking Energy Group. Viking in turn has part ownership of multiple oil and gas fields across different states. These include Texas, Louisiana and Mississippi.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

To understand why the Camber Energy share price crashed, I first need to appreciate why it rallied so much recently. There are a few different reasons for this.

The first one is the fact that commodity prices have been rising. Oil hit $80 per bbl late last week, quite a change from spring of last year when prices briefly traded below zero! Higher oil prices obviously help the business as the produce sourced is worth more in value when sold.

Another reason for the rally was confirmation of a deal with ESG Clean Energy in late August. This agreement allows Camber Energy to use ESG’s patented carbon-capture system in the United States and Canada. This system is good for the environment as an electricity generator, so makes the company more popular with green investors.

A report causing the share price to crash

Unfortunately, the benefits that the above provided for the Camber Energy share price were undone with the publication of a report from Kerrisdale Capital. In the opening paragraph, it boldly states that “Camber is a defunct oil producer that has failed to file financial statements with the SEC since September 2020, is in danger of having its stock delisted next month, and just fired its accounting firm in September.”

It also claimed that Viking Energy Group has a negative book value, along with a host of other negative comments about the business.

Naturally, the report saw a lot of investors sell stock. Given that the company was popular with retail investors, I think a lot of panic-selling went on yesterday. This compounded the situation and led to the large fall in the Camber Energy share price.

It’ll take some time for people to verify the allegations made in the report by Kerrisdale. It’s also worth noting that the fund was already ‘shorting’ Camber Energy before the report was made public. This means that the firm stands to profit if the share price falls.

There’s nothing wrong with writing about a stock if you own it, but the publishing of the report was obviously going to cause some investors to sell quickly. So I’m cautious about believing everything written and will let the dust settle. I’d imagine Camber Energy will issue a statement soon clarifying some of the allegations made.

I’m not going to be investing though, as I already own other oil and gas stocks. The industry is volatile and high-risk. Even if I didn’t own those other stocks, I’d want to do my homework before investing here.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

jonathansmith1 and The Motley Fool UK have no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.