The Oil Short Squeeze Explained: Why Banks Are Aggressively Propping Up Energy Stocks

Distressed shale oil and gas companies are taking advantage of the recent oil price short squeeze to raise capital with the help of the investment banks. The catch? The money raised is to pay back the bank loans owned by the same banks before another wheel falls off of the O&G space.

Case in point, JP Morgan is raising equity, i.e. pushing stocks to retail investors, for Weatherford, an O&G company valued as insolvent by conventional accounting measures, so that the proceeds can be used to re-pay its revolving credit facility to JP Morgan.

The conflict of interest is brazen if not criminal. As for the retail investors, you’ll never know if you don’t know now, as the song “You Will Never Know” goes.

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