MSB Trading - 2019, page-1670

The Put-Through after the close today is likely nothing to do with NovaQuest, but indicates either a simple transfer between two accounts at a fund manager, or could be related to the recent aggressive US buying.

A Put-Through is where a fund manager has different funds held through different nominees or Custodians and they sell from one client to the other.

Who are these nominees?
They are generally an arm of a big domestic or international bank. They usually own shares on behalf of multiple clients, including big fund managers, and the underlying clients of these big fund managers.

The MSB share register has HSBC Custody Nominees (35%), JP Morgan Nominees (11%), Citicorp, National, UBS, BNP Paribas nominees all as big holders.

Why do fund managers have different nominee/custodian companies?

You might see that a single fund manager uses more than one of these nominee companies to hold their MSB shares. The fund managers' underlying wholesale clients choose the nominee who owns the shares (in a sub account in the name of the underlying client). That way, the underlying wholesale client (e.g. Australian Super, REST, Unisuper, Etc etc) maintains control of the underlying shares and this makes it much easier for these big underlying clients to change fund managers.

It also hides who the actual fund managers making the buy and sell decisions are; and it also hides the underlying clients. The only times you get more detail is when a substantial shareholder notice is lodged, or other forms are lodged with the SEC in the US, or if those managers disclose their top shareholdings.

The shares stay with the nominee - so if the underlying client changes fund managers, that manager doesn't have to sell all the shares and realise capital gains - the shares stay with the nominee in the name of the underlying client, and then the underlying client simply appoints a new fund manager.

The underlying wholesale client signs an Investment Management Agreement (often called a "mandate") with the fund manager, which gives the fund manager the right to trade those shares which are held by the nominee. The fund manager never directly touches the shares or the cash - he advises a stockbroker (including direct market access) to buy or sell, then he advises the broker to settle the trade against the nominee. The fund manager then advises the nominee how much to pay and how many shares were bought (or how much cash to receive and how many shares were sold). Both sides - the broker and the nominee - then settle the trade through the Chess system according to the instructions from the fund manager.

So what happened to MSB this afternoon?
The trade of 3.64m shares after the close was reported as a "Put Through". That is defined as where a fund manager crosses stock between two of his own accounts where the shares are held by two different nominee companies.

This could happen because one of his clients has changed Nominees (very unusual but possible), or due to a redemption of funds (but the manager uses it as a way to increase his MSB holdings for his other funds without having to buy in the market).

It is quite possibly just a simple transfer between two accounts, but it could also be related to the recent big buying in the US if a broker has been facilitating the trade by shorting MESO shares, and then buying back in the Aussie market at a discount the next day and possibly doing all this through its own nominee accounts (e.g. UBS prime broker has been active in MSB in some previous big transactions and could be using UBS Nominees- just as an example).

I think this is a much more likely scenario than NovaQuest selling (which I think is unlikely).

Why is this important?
It could be another indication of the big US buyer in MESO US listed ADRs which is big enough to spill over into the Australian market and is pushing up the Aussie price.

This buying started in late June (June 26th saw a 20% price rise in MESO at the high on the day in the US vs the Aussie market close) and seems to be ongoing.

At present, with the share price moving averages having registered a "Golden Cross", and with more news from FDA, trial results and potential partners possible in the near term, and a big aggressive US buyer, it looks like the price goes higher.