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I was there with you with NMC and by some miracle I managed to get out literally the day before...it was around £25k.. I don't like shorters normally but Muddy waters saved me a fortune on that occasion with their report
That's a very good point Serependity about liquidating their assets at almost full value .in effect if I read it right they will be selling around £70 million of their assets at only a 3% discount ...I wouldn't be opposed to to them selling ALL of their remaining assets at up to a 20% discount (good and bad combined) because on liquidating the company we would then each receive about £1.25 per share...a very healthy profit from where we stand now .
And I lost £70k on those NMC fraudsters!
Interesting debate about shorting. They are unpopular here as unfortunately LSE has a lot of rampers who shout down any negativity and blame MMS/shorters for any bad news.
IMO they add efficiency and stop a share being over inflated, it was the only social benefit of hedge funds who operate in a zero sum market and often win against each other or, worse, pension funds and LT investors (and stupid chancellors like Lamont and Brown).
Arguably shorting on loaned stock is no worse than me buying stock on margin
Hawfinch...so long-winded I was timed out...anyway what I concluded was that ultimately we hold different points of view but I do agree with many of the points you made.
Hawfinch...my response to your points in reverse..
3...Yes we are both agreed in the merits of the Muddy Waters report , although don't be fooled that they notified other shareholders of this out of moral intent.. they did it to spark a flood of selling which they could then buy back into.. but as I said the end result for me in that particular instance was to help me avoid around £20k in losses...and yes this is a very powerful argument in favour of shorting
2. Not sure the example you gave was a good one in that borrowing shares to sell them on is quite different to banks relending out their clients money using the multiplier effect of MLR's and this is because of risk...individuals holding cash (up to £85k) are exposed no risk whatsoever, no matter what the bank or other institution does with it..it also attracts an (albeit marginal) income return from interest . Them lending out your shares does carry risk..
1..this is the point that I find most difficulty with which might be due to my ignorance but my response is as follows :
(a) absolutely agree that they take a hell of a risk shorting a share due to them being exposed to losses far in excess of their original stake...this is why I monitor shorts and why with NRR in particular, I am worried about Millenium Partners slowly building up a short position.. this is evident of the fact that they think the share price could fall to maybe 20 pence or so ...but it's the action of them selling off those shares at well timed intervals which causes the price to fall further (or prevent them from rising) which makes other investors throw in their hand and sell up...the end result being that the share price falls further and further and the pace at which it happens increases and they then discreetly buy back the shares, give them back to the institution they borrowed them from and then profiting from the fall that they helped to create in the first place if that makes sense. This is why I don't understand why any institution would lend out its shares in the first place..
(b). I am not sure I understand why you assert that the system is biased towards buying ...I think it should be shouldn't it ? .the ultimate aim of the LSE is to provide a platform to invest in companies which enables them to grow such as.Unilever, Diaego..etc...and for you to share in that wealth creation
The liquidity required doesn't need 'shorts' it's provided by market makers who take their cut by the difference in the buy/sell spot price ..
(c) the larger pension funds just buy into the largest companies...the shares of these companies arent shorted or need to be, to make the system of exchange function properly ..
(d). My overall belief is that progressive wealth is made possible by people holding 'long' positions rather than 'short' ones...ultimately if you don't like a share don't buy it ..or if you are already holding it then sell it..
Long winded I know but I suppose in the end we have different points of
Wow Hawfinch..that was a very detailed and comprehensive reply...thanks for that...lots of points you raise are new arguments for me to ponder over , so forgive me if it takes time to reply
One area we both agree on which was also the other side of the argument that I had acknowledged, was the Muddy Waters report..that report undoubtedly drew attention to activities I was totally unaware of and saved me around £20,000 which fully supports your assertions ..
It's possible I might have been too self righteous in my earlier posting but as I say let me think over what you have written and I will get back to you..
My only observation is that none of the directors have made significant purchases of the shares at these supposed low levels. I submitted a question on this at one the recent results Q & A, but got no response. I suppose they will end up awarding themselves large share options at zero risk to themselves at some point with no risk. This could be a bargain, but sceptical at the moment.
Hawfinch...thanks for your comments which I always take note of. A few points.
1...The market efficiency concept is always the argument put forward by shorters...I dispute this because it leverages the sell side of the equation with shares that don't effectively exist .. this actually works to destabilise market efficiency . There is an inbuilt market efficiency created when, for example, Norges sell their holdings at between 55p and 60p and you buy in at 54p and I buy at 59p.. the end result is that the value of my investment (and yours for that matter ) has been orchestrated downwards by the short.. other small investors who act on emotion rather than ration will sell at this point and lose money
2. I would argue that shorts are not bona fide transactions...they are predator ones ..furthermore pension funds who lend out their client funds without their explicit approval are in my opinion acting with impropriety , given that their actions actually reduce the value of their clients (very often) pension fund investment ...Also what do they actually gain from it ?
3..Shorters can also damage the company itself by reducing the value of their market equity and making them a target for hedge funds and others looking to buy good assets on the cheap ..Yes the company could act by buying back their own shares and wiping out the shorters, but to do this they have to use up cash which could be invested elsewhere or borrow cash and increase their LTV which could damage their credit rating.
Having said all that. ..yes I also look for reasons not to buy and if I can't, only then will I buy .. This includes examining the levels of current shorts.. and yes it is frustrating when shorters move in after I have already invested...exploiting the volatility in the share price.
I do accept it isn't all one way, and sometimes they do a favour to investors and I am thinking of Muddy Waters attack on NMC Health earlier in the year when they shorted their shares and alerted investors of improprieties in NMC's Director activities .they obviously did this AFTER they had taken out the short..
Lots more to add but happy for you to change my mind..
The shorts are held mainly by institutions like the ones mentioned...their obvious ultimate goal is that the shares become worthless ...they clearly think the shares are overvalued at current prices...they will settle their shorts when they believe the prices have fallen to as low as they can, based on their interpretation of data on NRR held in the public domain .
The reason that I pay more attention to shorts is that they can lose more money than the value of their short position whereas longs can't . All this with shares they don't even own...they have simply borrowed them from major pension funds etc...these kinds of transactions should be outlawed....you shouldn't be able to sell shares that you don't own .
Yes there are more shorts below 0.5 % which are therefore excluded for summarised reporting ..I can find
1. Citadel Advisors with 0.48 %
2. Meridian Global Investors 0.28 %
There may be more ...if you add this to the 1.17 % reported and they have minimum shorts of 1.93 % which equates to 5.8 million shares
To put this into perspective though there are around the same amount of shares being traded every week so not such a big issue at present...the key thing to monitor is the future direction of travel for 'shorts'
% age holdings ..
HFinch what is your target for reversing the short and going long?
only about 1% of the stock is currently shorted https://www.shorttracker.co.uk/company/GB00BD7XPJ64/
The share price is under a lot of pressure. Just managed to hold on to 50p today. The shorts think we are headed down to 40p or maybe even 0p as equity is wiped out. Maybe they are right.....it would help if NRR gave regular updates but reit BoD seem to be an arrogant lot.
Lukee...I agree with you regarding the fundamentals of NRR as held in the public domain.. the half year ends in two weeks so we will get a clearer idea with those results, however we won't be informed of them until November ..
Current fall today based on small volumes so more volatile ... I would like to know though why Millennium Partners have increased their shorts position as surely there can't be much money to be made with a share price of 50p.....unless I am missing something ..like you say, there is ample liquidity and rents are still being collected and most of their clients are trading ...maybe it's the perceived impact on their pub chain with a maximum gathering of 6 people sitting together in a pub ..who knows..
Share price went down to low 50s in May and then high 70s in June - short term and medium term a lot can happen, but fundamentals haven't changed. As long as the BOD can sort out selling enough disposals to bring down LTV, NRR are in a strong position as no issues with liquidity it seems. Any positive news on such could really change things over night with also info on the future of dividends starting too. GLA :)
In the past month the share price has fallen 20 % from 65 pence to 53 pence..
Over the same period Norge's Bank have sold 2.2 million shares of their holding. . slightly more worrying and only last week , Millennium Partners have increased their shorting of NRR shares by 480,000
If these sales and shorts continue , the share price is likely to fall further in the short term..
Almost 2% of NRR's shares have now been shorted, although this is still substantially below the 8.3 % peak they reached in June 2019 and half the 4% shorts that existed before the pandemic took hold..
I always watch the direction of shorts closely ...during the past month they crept up ever so slightly albeit one short position was also reduced. I will be observing any further increase in Millennium Partners short position very closely..