Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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kenj
Thanks for explanation.
Bloo
I just don’t see how it is not a conflict of interests! I seem to recall the deal on the loan meant there were restrictions on what PMO could and couldn’t do, so if they are having to run everything past these loan sharks, how can it be good for the company. If anything they seem to want their cake and eat it! They want their loan paid back with interest, but they don’t want PMO to be too healthy otherwise the short will cost them dearly!
I do hope some big player decides to go after the big short position and force them to close it.
LTT
I think cads is correct!
Thanks redwine. I think the reason people are miffed is that it wasnt disclosed as it would normally be. Can you explain why all of a sudden it was disclosed. Were they hoping for some downward impact with it coinciding with the ST article which was regurgitated bloomberg article from september
of course my knowledge on is this is why i'm posting on here and not working for GS!!
cfds not cads...
I guess the reason GS keep issuing the TR1's is that the cfds are being adjusted based on the HF exposure to the SP. You are right though the transaction costs must be high and GS will be charging based on the risk in the opposite side. I think they will not be long on the share but using the cads to manage the risk?
So if they bought a call at same time as the debt (again costs eating into the profits) , then they’ve locked in some or all of the call by selling the stock short....why would they not just buy a put and reduce the dealing costs? Also iwhoever sold the call to them (presumably Goldman, MS) would need to go long as the price goes up to delta against their call exposure. And as far as I can tell, their cfd position has been reasonably static on this recent move up....
That’s my thinking plebeens or is too obvious ? I know these financiers are very clever, but hopefully on this occasion they’ve got too greedy & overcooked it.
BlooBird,
The shorters pay an agreed percentage commission to borrow the shares from from an investment trust, pension fund etc. They then sell these shares (which they do not own). They later buy the shares back at hopefully a lower price, return them to the lender, and pocket the price difference.
Large sells tend to push the sp down, making their job easier. Shorters also often act in unison with other shorters, much like a wolf pack attacking a larger beast. The higher the percentage of a company's shares being shorted, the more worried investors become. This often frightens investors into selling, lowering the share price and making it easier for the shorters to buy back at a good profit.
This is NOT all bluff and bluster though!
The shorters have got it right on many occasions, Carillion and Interserve etc. If like these examples a company goes bust, its shares are worthless and the borrowed shares do not have to be returned. The shorter then keeps the money he made by selling someone else's shares, and pays out no more than a small percentage borrowing fee.
What happens to the money created by selling shares short.
Does it go to the shorter or back to the person who loaned the shares (as security against the loan) ?
BTW at the risk of stating the bleedin obvious, this is why PMO's only priority should be to get the debt down and renegotiate a new lending package asap. Get these leaches of their backs.
I remember Richard Rose making a remark in the last call about not understanding why the share price was where it is. He is the CFO ffs. If he doesn't understand this, or know who is shorting his stock, then PMO needs a new CFO.
I think its simple - no? Buy the debt, buy the call at the same time and then use the debt as leverage (greenmail) to drive the SP down.
They are earning 2.1m per month on the coupon. I don't know (does anyone?) how long they have owned the debt, but the started building the short position in 2017, so lets say 2 years assuming they started buying both at the same time. Means they have earned around 50m on the coupon. On the ii board the poster lots_of_sense (thank you) has calculated that they are down 32m with the SP at 92p. So atm they are still up substantially.
However with 1.4m for every 1p move they will be feeling the need to do something. They could find themselves with a big problem ;-)
Or they were certain that there was going to be an equity raise to dilute the pot and give them an easy out? As said previously this stopped suddenly in July ahead of the Zama sale announcement and Sea Lion farmout proposal. And they have previously reduced this position on 2 occasions, but 5 months of inactivity and counting.
Can anybody financially clever out there explain how their position is fully hedged? In my brain it looks like they sold a call, assuming that the company didn’t have a great future. Buy the debt take the premium for the interest in the debt but then selling the outright stock against it has unlimited downside for them? As I can’t see how owning the debt (loaning PMO money) gives them an option to own stock unless the company goes bust? Not my field of expertise and happy to be enlightened
Recommended reading for the shorters.
Oil Price Currently $64.39
Talking of shorts
http://c.newsnow.co.uk/A/1011582791?-9263:4178
I can only view the current 20% short position as a major positive for turbo charging the share price. The fact that the SP is where it is, with potentially major debt reducing news pending, is akin to 5 gallons of petrol waiting to be tossed into the camp fire! Got me marshmallows ready...have you?