BRN (ASX) 2020 BRN Discussion

Originally posted by Fact Finder: ↑

Hi George

The best way to answer your question is to consider how a normal auction sale works.

I have a gold ring and I want to sell it. I am not sure exactly what the gold ring is worth but I have had it for a few years and have some attachment to it so even though I have no real idea what it is worth I decide that if I can get $200.00 for it then I will sell it. Not wanting to sell myself short however I decide the best way to sell my gold ring and find out what the market will pay for it is to send it to auction with a reserve of $200.00.

At the auction there will be a number of people who hopefully want to buy my gold ring and to increase the chances of there being people who want to buy it I have not just sent it to any auction but to a speciality gold men's ring auction expecting that everyone who attends will be interested in buying gold rings.

When the my ring comes up for sale the first person bids $100.00 and a second person bids $150 and so on and so forth until the price reaches my reserve and the auctioneer announces that my gold ring is on the market indicating to bidders that the reserve has been met and whatever is bid will secure my gold ring.

The ASX market for BRN shares is just like the speciality gold ring auction. Everyone who is bidding to buy is interested solely in buying BRN shares and will be aware that if they are to be successful they will have to meet the market that is they will have to bid a price that no one else is prepared to pay for one BRN share and this price has to be a price that someone who has a BRN share is prepared to take.

Currently we have a situation where about 99% of shareholders are not interested in taking the present price being offered by the market. Why is this because they have a personal view point and a level of attachment to their share/s.

However everyone of the 20,000 shareholders will have a reserve price in their head that if someone offers this price they will be willing to sell some or all of their shares. Even the holders who currently believe they are not willing to sell their shares for five years if the price went to $100 a share tomorrow may very well realise that their reserve price had in fact been $99.99 and place their shares up for sale.

Now why is it that 99% of current shareholders have a view that the present price is inadequate. Well they all saw the price go to 97 cents without any commercial deal being announced so in a very simplistic run of logic they like me conclude that if commercial sales are announced BRN is probably going to rerate to at least 97 cents and the quality of the commercial sales announcement will define the upper end of that rerate.

For example if they announced a commercial sale with Donger Smart Door Bell Company for 50 million dollars a year the odds are that the market would value this deal but not as much as it would value a deal with Samsung for smart door bells worth 50 million dollars a year in much the same way as my gold ring would be valued differently if it was marked with the Tiffany Brand.

At the moment the market for BRN shares is taken up by all those who value the future potential on the one side and all those who are waiting to find out if the commercial deals will be announced.

If you have been too many auctions you will note that people bid in all different patterns but if you are going to bid you have to bid before the auction of the item you want finishes and the hammer falls. As the auctioneer counts down to sold the pressure builds and buyers have to decide.

Though the present count down of going once, going twice for BRN shares is very drawn out, it is in fact going on, with interested investors in BRN feeling the increasing pressure to buy as new information is made known to the market and as we get closer to the announcement of the commercial deal/s. The pressure to buy will cause some buyers to raise their price to meet the reserves of sellers. Many describe this as fear of missing out kicking in and for some that is what happens and for others they are doing their research as I type this and have reached a point where they value BRN sufficiently to pay the price being offered by a seller.

If you look at the list of sellers to buyers on Commsec for example there are already a number of sellers who have determined a reserve price for their shares and they are sitting waiting for a buyer to bid that price. Again these sellers may as news comes from BRN and we get closer to the release of commercial deals may also adjust their view of a proper reserve price for their share/s.

The problem with these lists of course is they are not entirely accurate as false bids are constantly used to distort the appearance of the market. If you look at the buy side there was one buyer who when the share price was sitting at 50 plus cents was offering to buy 1 million shares at 1 cent a share. This could not be a true buy order because if the price of BRN fell to 1cent a share at that point in the company's development it would be all over and hold no value at all so what person in their right mind would be a buyer at any price even 1 cent.

I hope this addresses your question.
FF.

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I love the way you answered that thank you for the education for myself

No.	Vol.	Price($)
30	695963	24.0¢

No.

Vol.

Price($)

695963

24.0¢

Price($)	Vol.	No.
24.5¢	114780	10

Price($)

Vol.

No.

24.5¢

114780

No.	Vol.	Price($)
30	695963	0.240
27	1258972	0.235
27	1656411	0.230
24	1229473	0.225
43	1698687	0.220

No.

Vol.

Price($)

695963

0.240

1258972

0.235

1656411

0.230

1229473

0.225

1698687

0.220

Price($)	Vol.	No.
0.245	114780	10
0.250	1730554	40
0.255	977514	25
0.260	727603	21
0.265	301272	12

Price($)

Vol.

No.

0.245

114780

0.250

1730554

0.255

977514

0.260

727603

0.265

301272

(20min delay)
Last 24.5¢		Change 0.010(4.26%)		Mkt cap ! $488.1M

Open	High	Low	Value	Volume
23.5¢	25.0¢	23.0¢	$2.182M	9.033M

2020 BRN Discussion, page-17909

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