Nationalization of Industry

[Mudhen]

I currently own stock in Crystallex Corp (KRY), a gold mining stock with a developing mine in Venezuela. There are concerns that President Chavez may nationalize the foreign mining industries as he has done with other industries. Crystallex is a Canadian firm.

In the event Chavez did decide to nationalize and take over operations of the Crystallex gold mines, what would happen to the stock holders? Does the stock merely become worthless or does international law require Venezuela to pay Crystallex and its stock holders market value?

[Stocktrading101]

I do not know the answer to that but it would definitely be worth finding out. Off the top of my head I dont think the government can just take control without compensating the company in some way shape or form.

You also have to think, since this news is publicly known and especially known to all the major institutional holders, that if it was a big negative they would have all sold off into the news.

Looking at a chart of KRY the stock closed today at $2.48 which is right near the August low of $2.32, but there hasn't been any distinct heavy distribution days that I can see here. Gold/Silver are extremely hot though right now as well, if that trend ends KRY most likely will not be a good hold.

So really you can ask yourself, is this stock worth holding at all?

Hope that helps!

[Airelon]

Ah yes. Nationalization. Such a pretty term for what the rest of us call it. Stealing.

Here's the ugly truth of it. The common shareholders are always the ones left holding the bag when it comes to really really bad news. It's part of the risk of being a common, rather than preferred shareholder. And Nationalization is about as bad news as a shareholder can possibly receive. Not even bankcruptcy is as bad as nationalization. Generally, with a country such as Venezuela nationalizing a private company? Even the preferred shareholders would be screwed over.

Sorry to say, but in my humble but honest option - if it's nationalized - you're completely screwed. Chavez hates the U.S., and anyone remotely associated with them; and though protected by the Monroe doctrine the man likes to flip the bird to the U.S. as often as possible.

Here's what you have to ask yourself: Is he going to support the Calvo Doctrine? Socialists, such as Chavez, do not. It conflicts with their socialist mindset. Thus, there would be no compensation. In other words - his political outlook tells him that he should just steal it rather than pay the rightful owners.

[Mudhen]

I agree with your take on Chavez, however do you have any idea of his realtionship with Canada? Crystallex is a Canadian company and I was hopeful, if he still has decent relations with Canada he may not want to disrupt things more than he already has.

[Airelon]

Why I mentioned one of those "guilt by association" fronts. With that guy - you never know. As a socialist, he's not going to accept the Calvo doctrine, which means he doesn't believe in recompensing the private company, regardless of origin, when it's nationalized.