The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
Please understand that what is written below is not any kind of ‘de-ramping’ exercise, but simply a cold-headed analysis of what might be happening. Of course, this all assumes that there are no fundamental issues or nasty news in the pipeline.
Might there be a distressed/forced/newly-bearish (institutional) seller out there, pushing the price down? Well, of course this is entirely possible. However, I’d point out that public trading in any kind of institutional-material size in a stock of this kind is difficult, and so institutions are usually very reluctant to do so. Also, brokers watch the list of registered shareholders like hawks – they know who might be sellers, and are quick to move prices against them if they start reducing stakes. (In summary once IIs are in, usually via placings etc., it’s very difficult for them to exit). I have seen no IIs on any lists of significant shareholdings (3% of the company is c£5m, which is peanuts from an institutional perspective). So, in summary, I find the II-selling argument difficult to buy in to.
So, who else might be selling? Well, I note that approx. 39% of the stock is with Hargreaves Lansdown, Interactive Investor, Halifax Share Dealing, Barclays Wealth & AJ Bell Securities, ie. nominees for private punters. No doubt there are a number of smaller retail brokers out there with significant, but not declarable, holdings also. Plus, there will be positions via the plethora of CFD, spread-betting and other punting outfits. I’d guesstimate that well over 50% of the stock is held by or for private punters like, well, you (or me).
A lot of people invest/trade with stop-losses in place, for understandable risk management reasons. However, price declines can become self-reinforcing as stop-levels get triggered, and people start panicking and running for the exits simultaneously. So, yes, I’m afraid that while you personally may not have been panicking recently, some people like you have been getting stressed-out and have sold. Needless to say, when prices reach a more attractive level, then buyers will emerge (may be happening already).
Bull points:
- a significant discount to NAV, taking into account the latest ON share price.
- an interesting portfolio of underlying investments
Bear points:
- there's a 6-month lock-up period for the shares post-IPO. SUPP can't realise the current value now. In 6 months time, every other large shareholder will be thinking about selling.
- IPOs have historically tended to underperform after any 1st day 'pop'. Also, who knows where the overall stock market will be in 6 months. Many say it's massively overvalued currently (why do you think ON was looking to IPO?). Overall, ON may well be worth much less in 6 months time.
- the IPO has happened already. As the old stock-market saying has it, "Buy the rumour, sell the fact"...
"Simple rule of communication; If you don't tell people what's going on, they'll make it up for you and it probably won't be that great....A lot can be said to allay concerns without going anywhere near revealing negotiation tactics or positions". Would that it were so simple....
For better or worse, RBW has to satisfy multiple stakeholders simultaneously; any public announcements to shareholders will be pored over by the Burundi authorities. For example, if RBW were to say something like "everything is fine, we're on top", the Burundians would get tougher. Conversely, if RBW were to say it's going terribly, that might well scare shareholders, and hammer the SP, while not necessarily incentivising Burundi to go more softly. (The Burundians would want to set a benchmark for parallel or future negotiations with other mining operators).
RBW may well be nodding and winking to *some* (large) shareholders, or at least giving them a little more colour about what's happening, even if this is technically against the rules. It's just how the world works - regrettably small-time punters get disregarded.
I've seen apparently similar situations in DRC get worked out eventually. I don't recall running commentaries there either though.
I'm so glad you've discovered the reply button...
With respect to 'I now appear to be addressing myself', you do have a curious perspective - i.e. keener to play the man rather than the ball.
If owning only 4% of Nanopore (much less than say IPO) is going to make SUPP fly, then good luck with that (you'll need it).
DP: at least two issues, of course, with the 'focus on SA argument':
- SA has only a c. 15 year life - a wasting asset, which the market will always be less enthusiastic about than an on-going project.
- in the ideal scenario, the continuing revenues from Gakara would have supported the development of the SA asset. That looks to be less likely now.
At the risk of continuing your negative-cross-post on PRE, if a 25% 'tax' would kill their Angolan project, then presumably it's 25% of mine revenues, rather than 25% of earnings?
This posting seeks to demonstrates poor chatroom/internet etiquette and usage. There are various aspects to this:
- breaking threads, so that people can't work out why anything is being written (why not use the 'reply' link?).
- putting peoples' usernames in the subject line (see what I did above?), which in some cases might be regarded as an ultra-low-level ad-hominem attack, but more usually is simply an odd way of doing things.
Oh, yeah, good luck to all investors in SUPP. It may or may not be a good investment at current levels. However, that won't be anything to do with, e.g., 'Mr market' not realising how much Oxford Nanopore is held.
"SUPP is a hidden gem! I'm tired of leading horses to water..."
Some people are so stupid, they think they're clever. Your abusive 'Idiot!' has been referred to the moderators.
IP Group owns 15% of Oxford Nanopore's shares. The fair value of £340.3m for this stake, as a percentage of *IP's* overall portfolio valuation of £1,162.7m, comes to around 29% of the portfolio.
“…according to my research (which I have temporarily mislaid), SUPP owns 21% of Oxford Nanopore…” -I’d love this to be true, but it seems so unlikely that I haven’t bothered to check it in detail. For one thing, at end-2019 the accounts state explicitly that SUPP owned 4% of Nanopore. In the intervening period, SUPP has had well-publicised problems, and Nanopore has been raising capital from various investors. What are the chances that SUPP has increased its stake 5x in that period? (I’m happy for my reasoning here to be shown to be erroneous by the way)
“… if you apply IPO's valuation of Oxford Nanopore to SUPP's holding it works out at 168% of SUPP's current Mkt. Cap…” – that *might*be true, I suppose, but I haven’t bothered checking. Two points that I’d make:
- The people that do these kinds of valuations draw upon the same data, use similar techniques, and (most importantly) watch each other’s published results. The primary data point is whatever price at which capital was raised recently.
- Even if IP’s and SUPP’s valuation numbers for ON were dramatically out of line, the market will generally be efficient enough to factor-in whatever valuation number seems most realistic, particularly *if* it’s for a big holding.
"... a fair value of £340.3m for the Group’s 15.0% undiluted shareholding..." The 15% refers to the percentage of Oxford Nanopore's shares held. The fair value of £340.3m for this stake, as a percentage of SUPP's overall portfolio valuation of £1,162.7m, comes to around 29%.
I can assure you that there is no confusion in my mind as regards the above. I can't comment about anyone else though.
As I wrote previously, I’m inclined to treat gosh-look-at-this, puff-piece articles about IPOs in the press with a high degree of caution. Investment banks have an incentive to 'talk up' the price of a prospective IPO, to curry favour or win business from the company, just as estate agents will b*llsh*t about how much your house might be worth, if you were to use their services.
Don't believe any Nanopore IPO numbers until you see them, and even then be cautious.
I believe it's a matter of public record (see https://www.theguardian.com/business/2021/mar/30/oxford-nanopore-to-float-on-london-stock-exchange) that the largest holder of Nanopore is IP Group. From the IP Group annual accounts, Nanopore is 29% of their portfolio. It's 21% of the SUPP portfolio.
It would appear that IP has more exposure to Nanopore.
"...they are in a position of negotiation and the last thing they should do is make public any clues to their strategy..."
Also, the chances of an informative reply to an email of this nature are minimal, not least to avoid potential inside information issues.
Thanks kickmuck for pointing out the "...less than 1Bq/g of radionuclides present..." sentence - very helpful.
Unfortunately, the relationship between Becquerels (Bq - radioactivity of the material) and milliSieverts (mSv - dose/exposure to radioactivity) is complex, and is certainly not linear as you appear to suggest.
While I'm quite prepared to believe what the company is saying about Phal (particularly) and Gakara having low or very low uranium/thorium (actinide metal) contamination, it's not clear to me (and perhaps others) how much practical difference that makes.
Now, the published evidence on the Gakara deposit (see below) is that the concentration of uranium and thorium in the monazite & bastnaesite minerals is approx. 50 parts per million (0.005%) – and yet the mined ore needs to go to China currently to be cleaned-up. (Presumably a mixed REE concentrate from Gakara would have similar-order-of-magnitude actinide concentrations.)
Now, we have been led to believe that the concentrations at Phal are even lower; see for example, the latest Phal RNS:
“The phosphogypsum contains exceptionally low levels of radioactive elements uranium and thorium when compared to other rare earth projects. No radioactivity controls are expected to be required for the shipment of the rare earth products.”
(Why can’t they be specific about the numbers?)
I personally have no idea what levels of actinide concentration become i) dangerous, and/or ii) metallurgically problematic from a magnet production perspective. I suspect though that the point about ‘radioactivity controls’ is more about shipping safety standards than about metallurgical suitability.
Question: does anyone have an idea of the tolerances for actinides in commercially produced NdOx? Is say 1 part in a million acceptable?
Reference: https://www.researchgate.net/publication/327500618_Geology_and_U-Th-Pb_dating_of_the_Gakara_REE_deposit_Burundi/download
It'll be interesting to see if this has any discernible effect on demand for stock. I'd be surprised if there was much money in funds tracking this kind of index, however.
Continually buying into a declining stock at progressively lower prices, simply to lock-in a lower average price is rarely a good idea per se. There is a old, bad-taste City saying about averaging-down having killed more (people of a certain ethnic persuasion) than (a certain moustachioed German chap with a bad haircut)....
The advice to 'manage your position sizes and spread your risk' is well made.
However, if a stock reaches a level at which it is incontrovertibly excellent value, on a risk-reward basis, then of course one should go for it.
With all respect, I think there's little to be gained from trying to micro-analyse the trade data - the fact that it's there doesn't mean that it's necessarily very useful (e.g. trying to interpret the meaning or effect of individual trades is fraught with difficulties).
In general, a rising price indicates more buyers than sellers, and vice versa for a falling price....
With all respect, I think there's little to be gained from trying to micro-analyse the trade data - the fact that it's there doesn't mean that it's necessarily very useful.
A rising price indicates more buyers than sellers, and vice versa for a falling price.
Text from a PME RMS:
"Auction call extensions give London Stock Exchange electronic order book users a further opportunity to review the prices and sizes of orders entered in an individual security's auction call before the execution occurs. A price monitoring extension is activated when the matching process would have otherwise resulted in an execution price that is a pre-determined percentage above or below the price of the most recent automated execution today."
The London market goes into auction mode three(?) times a day - I believe at the open, close and at 12pm. As the text says, if the auction results in a matched-price that diverges significantly from previous trading (implying a mismatch between buys and sells), then the auction period is extended. In itself, a PME means very little.
This is a complex area. In general, there is more 'visible' liquidity available for larger stocks, and at certain times of the day, e.g. close to the LSE auction periods, or at the close. I find that even for mid-cap stocks, someone needs to pick up a phone to do a trade, even in quite modest size.
RBW is a small company, and so brokers are unlikely to be showing two-way liquidity in size on SETS(mm) at all times. (For what it's worth, there are probably at best only a small handful of brokers that make a market in RBW). Also, dare I say it, for stocks which may be experiencing a degree of selling pressure, bids may be slightly harder to come by...