The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
In terms of value investing - have you heard the saying "in the short term the market is a voting machine (opinion machine) in the long term its a weighing machine (returns machine).
My vote goes to the story i tell myself that currently GGP is sounding out a listing on the ASX. And with that listing - may come the need for some $$$ depending on what happen to their development partner. So the market knows that probably cheaper hares are coming and in volume in the next 18 months. So there is downward pressure on the share price - i will sell you however many shares you want at 8p 7p because i can get them back at 5p in 2024.
If you were the GGP board and you had to raise money sometime between today and say 2025 - when would you do this? I guess once the first cash flow arrives from the miine partnership - so once the weighing machine starts, then maybe we can get money at 10p or 15p - once this event is behind then with cash flow the share price will probably start to move.
In summary - you cant just take the Value view - you also need the Market view as well - both make a share price.
Thanks - Blue
Its a competition - if a bid arrives they want to fill that business - its pretty basic - i want to buy £100k of HEMO - who has the lowest price? The dealer (me) will speak to the market (its a big order) and i will get price and size - so i will ask MM1 what's you price in size - they say 2.00 to 2.25 for 100k - 1.90 to 2.40 for a bar (1m) and 1.70 to 2.75 for 5 bars.
So note i have not told them whats my price to BUY £100k.
They just know there is a big Buy or Sell order coming - and do they want to make they guess 1M x the spread 0.5 pence to trade - thats £5k for saying Yes or No.
Lets say their book is Long £25k then they will either end up with £125k long if i sell to them (better ask Risk) or £75k Short if i buy (as Risk again).
I can go around and ask more MM - and i probably will - but lets assume MM1 Bid the worst price but Offered the best price - its an offer so its a contract - I would then say - OK can you make the price for 4 Million - and MM1 says OK its 1.75 / 2.70 - and i say can you go 1.80 / 2.65 and he can tell me to FO or say Yes - he / she then says hold on 10 seconds - phone goes on hold - i think then shots out to Risk - Bid Offer on 4m HEMO its 100k - OK ?? Risk says Yes - then i say I buy 4m HEMO at 2.65 timed 2.45 etc .... and then the trade goes into SETS for settlement. Thats it - for me all done - i report trade to broker - broker reports to client. We take a 0.25 / 0.5 commission more if you are a PI.
Then RISK tells MM1 to get book into limits - say + - £50k - and then the MM1 goes hunting for offers to reduce the book - probably by raising the offer to the market a bit - the other MM will know what has happened so they may square off their books at this money - so you see a few blocky trades go through - or the price attracts a few sellers who think mmm HEMO is up 0.25p today good price to sell a few. That's how the market worked when i was there - happy for anyone more up to date to clear up any differences. OH and as a PS - the MM then rings you at 3.30PM and asks if you want a beer after work - that's when after 3 or 4 beers they ask if its a regular client order and if it is would you like to go and see some strippers take their clothes off - all paid for by Winterflood Securities or whoever he / she works for.
Hi - i was s dealers assistant before going into sales - so the MM will fill any orders they can because it makes them money - give them a bug buy order they will wiggle the price around a bit to fill it - its how they make money - give them a large sell to place they will wiggle the price around a bit - its how they make money - they only make money by selling or buying - in a stock like HEMO they wont have very much freedom at all to run a large book position - almost nothing - probably around £25k - £50k and so most of the time they need to just encourage order flow by dropping the price until buyers appear - if there is a bid in the market the price will jump even as much as the other day and when the bid disappears the lower prices looking for buyers will prevail. MM don't care much about the company or its prospects they don't build up huge book positions - their risk manager wont let them, they seek order flow through their book as that's what pays their wages. Most of the sell action you see is probably - in fact certainly - auto trades being algo managed - they just match up buys and sells and put them through the book. There is a MM overseeing the book and if a bid appears or the market gets FAST then yes a human will oversee this - but day to day - its just an algo running. And finally the MM are overseen by the Risk Manager.
Share Tips / Recommendations and Research don't come for free !
Can someone help me to understand why the new CFO would want to receive 50,000 shares / units / shares in a company that is about to have its cap table wiped out on restructuring ?? I don't understand, is this some technical requirement under Canadian insolvency law or something?
Thanks Blue
Why $70 ... ??
Surely its better to use a standard deviation from the mean trading price over say the last 6 months - or year - or whatever time range?
If the price is say + 2SDs then it can be considered as abnormal, maybe?
Its nonsense anyway - gas prices in europe peaked in August 2022 and they are now only 1/8th of that price spot - and long term 55 > 80 $ is the trading range for the past 5 years at least .
Inflation adjusted oil price is even more interesting - adjusting back from Feb 2023 - the mean average OP from Jan 2000 for NYMEX (illinois Sweet) is ... ta da ... $74.50 vs todays spot of $70. So why the tax escalator? Well its clearly political virtue signalling, not really based on any maths.
And finally, price spikes happen all the time, its good old supply vs demand vs supply. For example last month we had a fresh tomato spot price spike as Morocco and southern Spain received a blast of cold and cloudy weather, delaying the ripening of their greenhouse tomatoes - same for eggs - they are commodities - where is the Government fiscal meddling in these markets?
I am very happy to receive the counterfactual argument back that these taxes are good rather than bad, i do get they fund Government intervention in the electricity market but government meddling inside of markets has a long history of being either wrong, or right and wrongly delivered, or confusing to the market participants - look at the current move from zirp to NORMAL interest rates and how its blowing up banks because they expected Government led policy to last forever.
OK rant over - time to do some useful work !
Thanks Blue
They wont sell any shares, they will sell the assets.
The shares are worthless, as they have too many liabilities / debt.
The assets will be sold to repay some of the debt owed.
Shareholders will get nothing.
Thanks Blue
Doesn't it also mean that as the fresh loan capital hits the balance sheet it stops creditors who are owed monies suing for settlement of their existing debts - it protects the new capital from old debt claims. Thanks Blue
Yes, the asset will most likely get refinanced but there is zero chance the current shareholders will get anything more than about 2-5% of their value last day of trading - any new money will wipe out the existing failed equity holders - we don't get a free ride on someone else's coin i am afraid. That's how equity works im afraid, loans and bonds are more senior and they convert into fresh new equity, killing off the old dead money. Full disclosure - i lost £11k here. Thanks Blue
Unpopular thoughts ...
To add to that - what if the Telfer + Hav was not part of the plans in a successful takeover - just run the performing assets for cashflow and dont sink lots of new development money into new extraction targets ?
Using a bit of Bayesian probability theory -
The successful conclusion of Hav + Telfer is = 90%
The cancellation of the Hav + Telfer is 10%
and
The successful takeover of NCM is 75%
The rejection is 25%
OK its a game ... anyone here at LSE GGP want to add their probability ratings - the two events have to total 100% so you cant have 30% 40% or 80% 30% for example.
Thanks Blue
Ring HL and speak to a telephone dealer - they will get a price for you - the platform is just automated trdade matching - the NA will make a book / price.
Thanks Blue
Manifesto.
No need to be insulting - actually i did institutional sales for 2 desks in the 1990s and we were a small companies team so we did a lot of book building and placings, yes i do know how it works. Thanks Blue
Manifesto - it tells you there are loads of no risk to the MM shares available at 2.5 pence - they dont need the spread to protect them as the bid is not going anywhere while there are placing shares available to the MM at 2.5 pence.
The brokers build and fill the 'book'
The MM get an allocation of whatever then need to keep the market efficient
Then when the book is full and the placing released, the market will trade again on book flow - meaning - buyers vs sellers to move the prices around.
Thats how it works - Thanks Blue
Mr India - they may not be buys - they could easily be short closing positions - Buy to Close - anyone in the market who had a whiff of a placing coming can short via spread betting then close out today - the action you see is the spread bet closing - its not black and white .
Thanks Blue
A big buy in the background - rubbish - any big buyer would contact the brokers and take part in the placing - if you have £50k etc - ring them, they will be filling the book and happy to accept your money.
Thanks Blue
It was just supposed to be a bit of fun, some people!
We used to get 50 calls a day on our desk asking why a share was falling, our boss always said "more sellers than buyers" it's usually the truth.
Thanks Blue
1. Theres a huge placing coming
2. ?
OK so thats a very good announcement for us - the important thing now is the time between this shipment and the next , so how quickly can they fill a bulk carrier with fresh material, and what's the target vs cashflows, one a week ??? 4 a week etc ? Its definitely good news though - Thanks Blue
Buys are open short closing - probably
This is a friendly message - i know investing in PURE has been a disaster - i have had a few - i recommend selling now before the shares delist because it makes it way easier to book any capital losses you may want to use in the future, remember if you sell other shares, sell a rental property etc you can use these capital losses to offset. The problem is that once the shares are delisted there is no market, no price, and no transfer process in place so it gets really complicated and expensive (esp in time) to manage this process.
Thanks Blue