Vistra Energy Corp (NYSE:VST)(OTCMKTS:VSTE) Looks To Be A Hidden Gem

Vistra Energy Corp (OTCMKTS: VSTE), the energy company, is a hidden gem found by our editorial team with a key catalyst. Insider Financial is pleased to announce that the company will be listed in the NYSE, under the symbol “VST". Why are we pleased? Because we think that the company is quite unknown among institutional investors. Coming from the OTC exchange and being listed in the NYSE mean that many new traders will assess the company. Thus, the chances of a price surge is possible. We will explain in detail this catalyst in this piece. Have a look at the recent price action:SourceBusinessThis investment play is not about what the company does, but about where the company's shares are traded. Furthermore, we will note later why we believe that the company is undervalued. Vistra Energy (VSTE) operates an integrated power business in Texas. The company has several branches. The most important are:

• TXU Energy™: is a retail electricity provider and is considered the largest retailer of electricity in Texas, selling services to 1.7 million customers as of December 31, 2016.
• Luminant: is in charge of the company's electricity generation. It has an installed capacity of 17,000 MW.
• Several other divisions responsible for the commodity risk management operation, mining, fuel handling, and the logistics operations of the company.

NYSEOur email subscribers know that the editorial team always looks for events that increase the liquidity of the shares. This is definitely the case. We will go to the specific features of VSTE, but first have a look at the following abstract published in the Journal and Financial Research about companies that commence trading in the NYSE:

"This study examines the market reaction to listing on the New York Stock Exchange (NYSE). The marketability gains hypothesis states that investors expect liquidity gains for the less liquid over-the-counter (OTC) stocks but not for their liquid counterparts after their listing on the NYSE. The hypothesis is supported even after accounting for other firm-specific news releases." Source

We don't want investors to read the academic paper, since it's full of horrible academic formulae. However, the conclusion is very relevant to the case of VSTE. When company's shares are listed on the NYSE, the amount of liquidity increases and the share price tends to increase as well. Why? Mainly because many more investors will be able to check the company's performance, consequently the chances of new buy orders and trades increase. Additionally, there are funds, who cannot make investments in companies not listed in the NYSE or the NASDAQ, and avoid the OTC markets. We believe that it is a mistake, but that is the way it is.The announcementOn May 4, 2017, the company announced that "Vistra Energy's common stock is expected to begin trading on the NYSE under the symbol "VST" beginning on May 10, 2017." The CEO and president of VSTE said the following words about the announcement:

"Our team has worked diligently to uplist to the New York Stock Exchange, which is an important milestone in the evolution of Vistra Energy. We believe the combination of our differentiated integrated model and strong balance sheet, coupled with trading on the well-regarded NYSE, will serve our current and future investors well. We are excited for our stock to trade on the NYSE and we look forward to continuing to diversify our investor base as our liquidity and exposure increase." Source

Additionally, John Tuttle, Global Head of Listings at the NYSE, said that the exchange was delighted to welcome Vistra Energy to the NYSE.Why do we appreciate this issue ?VSTE is not a small company with a share price under $1, which was delisted from the NYSE. In fact, the company is a large company with a market capitalization of $6.41 billion, which did an IPO on December 2016. Now, the company, for the first time, will be on the exchange. Why is is important? Because many investors did not had the chance to look at it before. Additionally, in our opinion, the fact that serious investors did not assess its balance sheet has made the share price undervalued.The company is undervaluedLike other energy companies, VSTE has a large debt. However, the amount of assets is quite substantial and the company holds cash in hand; $843 million or $1.97 per share. Additionally, the book value per share is $15.43, while the share price is $15.00. In addition to the liquidity issue described above, in our opinion, market analysts and bankers do not appreciate the company, because it is quite atypical and unique. Energy companies are never as integrated as VSTE, so we believe that analysts saw the company and understood that it is a conglomerate. Also, let me remind you that the market hates conglomerates, because they are not competitive. But, the conglomerate thesis here is wrong. Have a look at what we found hidden in one of the documents filed to the SEC website:

"Uniquely situated integrated energy infrastructure company. We believe the key factor that distinguishes us from others in our industry is the integrated nature of our business. We believe this is a unique company structure in the competitive ERCOT market and other competitive electricity markets across the country. It is our view that our integrated business model provides us a competitive advantage and results in more stable earnings under all market environments relative to our non-integrated competitors." Source

The vertical integration is an advantage that we believe traders and analysts did not see. The company does not have to hedge changes in commodity prices, since the company owns the power generators and is able to transmit price changes directly to clients:

"In general, non-integrated electricity retailers are subject to wholesale power price and resulting cash flow volatility when demand increases or supply tightens, which can potentially result in significant losses if an electricity retailer is not appropriately hedged. However, because our integrated business model enables us to manage through various price environments, we believe our retail operations (primarily TXU Energy) are not as exposed to wholesale power price volatility as non-integrated retail power companies." Source

To sum up, as mentioned earlier, the company is quite rare and did not trade on a decent exchange, so smart investors could not value the business properly. Hence, it is undervalued.ConclusionVistra Energy will soon be traded in the NYSE. We expect that the liquidity will increase, and ultimately the price will increase too. Additionally, we conclude that the company is quite undervalued, as analysts could not understand well the business. We also expect that other investors can now assess the vertical integration of the company and see that it as a good feature. Expect more institutional research coverage and buying. The 1Q 2017 will be released on May 18, 2017. To sum up, there is a lot to like in Vistra, mainly on May 10 and May 18, 2017. We will be updating our subscribers as soon as we know more. For the latest updates on VST/VSTE, sign up below!Disclosure: We have no position in VST/VSTE and have not been compensated for this article.