Hi All,
Just thought I'd share my thoughts on the current share price movements in LCL and what I think may play out of the next 6-8 weeks. I've been in LCL for a while now and I think the story still has some more legs based on what the drill bit has been telling us. I also think so far Jason has been doing exactly what he needs to do so far, so pleased with that too. Like many however, I've been a bit frustrated as to why the price has not pushed up to the levels of what I think it should be valued at relative to peers.
It got me thinking, why? So I thought back to a previous experience I had with NVA, where I thought it was undervalued, but each and every rally on good news was sold into again and again and again. What was happening was options conversion before expiry. It makes sense, why would the bigger players, who can move the price meaningfully, mark the price up knowing that there are large amounts of options that are in the money that will continue to be offered up. See chart below where you can see increased selling pressure leading up to the options expiry timing.
Why pay up and over 6-7c when options are being converted at 3.25c with plenty on offer. As each day passed and got closer and closer too options expiry, the 2A's kept coming and then finally they're done. Lets now look at the chart below to see what happens next.
The chart speaks for itself. Now look at the LCL chart as it stands. The timing looks ripe for a similar setup. Just need to have patience for only another 6-8 weeks. The major consideration for this comparison is that NVA had about 1 Billion SOI and 0.5 Billion options, a huge amount. LCL has around 450 million SOI and only 50 million options.
This is just my thinking and of course it may not play out. I'd love to hear the thoughts from other around this and what they know about who's holding the options and how they may play it. If I had a heap of options, I would wait until very late in the piece to be sure that the price allows the options to remain in the money. We've not seen too many converted so far, which makes sense, but I expect as we get closer to August that we'll see more 2A's.
Good luck to holders
(20min delay)