mohl to roadshow in uk & us, page-3

Just a bit from Amro's morning note. This guy's pretty good. The full report can be found at www.egoli.com.au


+ AMP: Day Five in the Round Up. Lets look at some facts. Reports suggest that the retail side of the AMP Offer came up call it 75mn shares SHORT. The 5% shareholding cap came off last Sunday. The retail pricing period starts on Monday with details of exactly how much (or not) UBS needs to sell emerging tomorrow. Now, lets speculate alittle. 75mn shares.

Scenario 1.
UBS has placed the majority with whomever (instos, retail, prop etc). We have heard that several medium/large retail brokers who recently called UBS and offered their sub-underwriting services have been politely told there is no need for their services. Does this mean there is no meaningful shortfall?
Scenario 2:
UBS managed to place say only 40mn shares and have a 35mn share shortfall. (they'd need to sell around 2.5mn shares per day over 15 days to get out of it). Now, lets go alittle further. We are also hearing that borrowing any substantial lines is becoming increasingly difficult. What does this mean? UBS might have already borrowed the stock and shorted it, thus strengthening Scenario One OR hedge funds have seen what's coming and borrowed plenty and shorted it meaning that UBS is in a bit of bother. One more twist.

Under Scenario One, if UBS placed the entire lot, there is going to be one big, bugger off short squeeze since it is well known that hedgies are short to the absolute gunnels this thing. What do I think? I'm an (under-zealous: if that isn't a word, it is now) fan of scenario one. Why? Lets look at who has done what over the past six weeks. Merrills have sold 29mn shares. UBS have sold 11mn. Other instos combined look to have sold around 40mn shares over the same period. How much of this is genuine selling or who much is shorting with borrowed stock? Who's bought it? How much of that was UBS selling through someone else? Comsec has been the absolute stand out buyer. Furthermore, UBS would be well aware of what was coming, what it would do the share price and how they could make a buck out of it. Its rallying now b/c, takeover rumour aside, that SPP period starts on Monday. We'll update when we get more numbers...