The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
This is not just a case of HF making a binary bet against TLW. Bond holders will hedge their position by shorting. PMO had ARCM hold their debt and also secretly shorting them. If the RBL is frustrated by unscrupulous bond holders who also hold a short position then it is almost guaranteed they will make money on the short. The FCA are spineless. They fined ARCM £870,000 after they shorted 16% of PMO. ARCM made hundreds of millions.
JM0205 in answer to your question they engage in a pattern of trading known as "convertible bond arbitrage". Essentially by adopting a neutral trading position you achieve a balance that allows you to make money at all times, whether the market rises or falls. Your percentage returns are lower, but consistent. The link below explains in detail. Also, quite often, when you see a disclosure RNS with the name of an institution it doesn't mean they are taking a position, it means they are reporting on behalf of a client. For example, you'll see that Hargreaves Landsdown hold a significant amount. This just represents the shares purchased and held on behalf of PI's who use their platform. https://www.eurekahedge.com/Research/News/1381/03jul_archive_cba
In 2009, writing in Rolling Stone, journalist Matt Taibbi famously described Goldman Sachs as a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money”....that's as true today as it was then. Personally I'm wary anytime GS get involved. They are more likely purchasing to lend to clients to short. They were a massive drag on PMO during the debacle of the refinance.
The SP will rise, but so will all bombed out stocks, over the course of 2021. The wild card will be any decent drill results. I suspect most of the shorters are connected to the debt; in the sense that their tactic is convertible bond arbitrage, thus hedging their exposure to TLW. I don't think the high short position reflects a contrary bet against TLW. The tell will be if the declared short position falls away after the conclusion of the RBL and any debt talks. The SP has risen in an unremarkable way thus far, it is in line with the market. 60p to £1 is realistic by Dec 2021, subject to known knowns and avoiding any further "black swan" events.
POO has nothing to do with Brexit. The original question was why we we're moving to a higher SP and the point I made is that there will be many cautious investors in cash on the sidelines of the stock market happy to wait and see what happens if there is no deal before committing funds.
The sentiment in the general market is unsure. Brexit will be a big concern for those on the sidelines. They will want to see what effect if any it has on the market. There is a view that $50 will not hold at this point and the POO is getting ahead of where we actually are. Although TLW has risen in since November it has broadly risen in line with, and tracking, the overall market. That is down to the vaccine news. As we move forward into Q1 sentiment may return with drills, vaccine and the reopening of the general economy. If $50+ holds then caution will recede. There is still a lot of money on the sidelines looking for a home when people feel confident enough to return.
Historically the SP of oil co's is soft in the summer months. By way of example last year TLW SP was 250ish at the end of April, 175 by August, but back to 230 by October. The SP hit 38p at the start of June, so I would expect it to be soft throughout August. Throw in weak market sentiment and oil stocks out of fashion; it's going to lag. The volume is so low that it is easy to move the SP with relatively minor amounts of money. It's a s*itshow generally. Many other stocks are well off highs of the start of June. Superdry was roughly 180 and is now 110. It's a binary gamble now. If a genuine vaccine is confirmed before Christmas/or no second wave/sale announced then money could flood back in. If not the whole market will sag. You need a crystal ball not research!
It's not being manipulated. It's out of fashion. If you look at the daily buy/sell averages they're small. The price always drifts in such circumstances. The "chancers" money is in pharma stocks ATM hoping for a lottery payday.
The US Presidential election is going to be key. Until recently the US markets assumed that Trump would win a second term. Now the majority believe that Biden will win. If Trump wins then there's no way you'll see $100 oil. Anything over $60 and he'll be on the phone to SA to keep the price low. If Biden wins then all bets are off. The Democrats are against shale for environmental reasons, so you'll see no new licenses etc and no Government support, that could have a dramatic effect over the next four years.
What do you think he is actually going to announce tomorrow? The company can't withhold information from the market, so there is nothing to report tomorrow, other than what coffee he drank on the way to work. Over the next six months, yes. TLW PR will want to paint this as a new dawn. The first news will be vote on the 15th. There after any news on further asset sales. Over July and August we'll see an uptick in consumption, so in theory a rise in the POO. Shorts are there for a number of reasons, including hedging debt. If $1BN was paid off, then you'd see shorts close. The market hates uncertainty. PMO has risen more in recent weeks, because a number of points of uncertainty have been resolved and therefore it attracts a wide pool of buyers, rather than just the chancers. You won't see a meaningful reduction in shorts until uncertainty reduces.
Comparing the SP of TLW and PMO is the wrong metric. Currently TLW has a higher market value by roughly £25m. The difference is the total number of shares in issue. TLW has far more in issue at 1.4 Bn where as PMO has only 922m in issue. Put bluntly if TLW had only 922m share in issue like PMO then SP would be around 50p today. TLW is actually outperforming PMO, so it is pointless comparing the two.
The one thing you can guarantee between now and Christmas will be market volatility, because big money is made in volatile times.
"The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."26 Apr 2018.
Retail investors will always be playing catch up. At best it's little more than informed guesswork. What makes me laugh is the hyperbole on these boards. On Friday 29th May this was 22p and it was doom/gloom this is going to 19p. If any of you have been told TLW would be 33.5p within two weeks, you'd all have been very happy.
GS "research notes" are as comical as reading Motley Fool. One week they're shouting oil will rise and the next, without any irony, they'll tell you it's going to crash! Stating the obvious, TLW is a momentum play based largely on sentiment, but that means there's money to be made!