Ann: A$100m Institutional Placement, page-177

How many short squeezes have there been on the ASX this year? It’s a narrative that gets thrown around HotCopper all the time but it’s nearly always wrong. Everyone thinks the fairly unique circumstances that drove AMC and GME up during 2021 will happen to them but guess what - it ain’t ‘2021, the year of free money’ anymore.

I follow (but do not hold) one of the most shorted stocks on the ASX, NAN, which earlier this year had 12.5% held short (I think it was #2 on the ASX most shorted). In a short space of time it dropped to 8% held short but the share price still sank due to the wider market conditions. In the current macro environment, short positions can be closed out pretty easily without impacting a share price to the upside. Plus, short positions can be covered by taking part in a capital raise (that’s likely how ZIP raised money at $1.90, they ran a capital raise and all the insto’s piled in and used it to cover their positions, then opened new smaller ones).

So: the posters trumpeting a short squeeze come Monday and an open/close at $1.30 etc will be disappointed. It’s just hopium. No negative sentiment from me, projectwise CXO is probably one of the better lithium options as it’s so much closer to production and is in a very safe jurisdiction vs others in South America (ignoring the very lofty valuation being applied here). But the reality is that the capital raise does have a bit of a whiff about it, considering Ganfeng’s fortuitous exit only a day or so before. I personally think it’s probably all above board but it might give some investors pause.

You also have to take on board the various announcements in mid-2021 after their combined $150M raise, including the FID announcement, where they trumpeted that they were fully funded to development (only $89M capex in the July ‘21 DFS, remember?). Yet here they are getting another $100M and diluting the register further. The money’s necessary I’m sure, but the optics aren’t delightful. It’s such a popular retail stock so long as the broader market doesn’t dump further, it’ll probably bounce back from here - but a short squeeze? Nope.