super, many thx!!!
The margins of an arbitrage trading strategy are very small and hence, I don’t believe that these small profits are the reason for the trading pattern…
It’s not an arbitrage trading strategy - it’s a buy STX cheap trading strategy… imho
The key is the following:
- With the t/o proposal, Strikes offers 0.4828 new STX shares for each TPD share.
- If a party is short selling Strike, this party can immediately buy TPD shares
- This party can transfer those TPD shares back into STX shares when the t/o transaction closes.
- Hence, a complete risk-free short selling is possible because the shorter covers its short position via the TPD to STX transfer
On Monday, 14th Aug STX announced the SOA proposal for TPD and this day marks the beginning of the accelerated short selling of STX. The aggregated short position at that day was 62m shares and currently (as of Sep 29) is at 110m shares:
The consequences:
=> >50m shares were shorted since 14th August (announcement of the t/o proposal). This delivers a huge amount of
"artificial supply" which puts a lid on our share price -
today's trading will be a quite clear example...
=> I think about
100m TPD shares were bought since than to cover the STX short position via the t/o transfer
- STX (90 days) average trading volume: 5.3m shares -> times 39 trading days since Aug 14 equals about 200m STX shares representing 7.9% of SOI.
- TPD (90 days) average trading volume: 3.4m shares -> times 39 trading days since Aug 14 equals about 130m TPD shares
=> Those TPD shares are representing until now about
15% of the fully diluted TPD capital and will vote in favor of the STX SOA proposal
=> The artificial supply of STX shares provided by the totally risk-free short selling delivered so far
7.9% of Strikes SOI to the market which could be picked-up via custody accounts for a interested party to build a strategic stake in STX... This will last until Dec 8 (and is only limited by the supply of TPD shares)...
=> The shorted STX shares are an opportunity to buy Strike for a very low price... I think, this is the underlying reasoning for the short seller...
it's actually a buying STX shares very cheap strategy to build a strategic position in Strike...I would expect, on the day when this is revealed via a 605/604 the STX share price will immediately jump to (or close to) the 80c, the look through valuation using the Hancock price for WGO...
I think MIN is behind all these activities.
(20min delay)