I don't think you have fully understood what I was getting at or, quite possibly, the mechanics of how it works. It's not taking stag profits, then shorting. It's shorting as part of taking a small (5-10%) stag profit strategy.
It's got nothing to do with Black–Scholes model for pricing derivatives, either.
A key point to understand here is that participants in the Placement cannot actually sell for a small stag profit unless they actually hold shares. That would be naked short-selling, which is unlawful for stocks. They can hold by either owning them outright or borrowing them. The problem is they have to wait 1 week before the shares actually issue (because payment will likely be due tomorrow, with settlement on Friday 26/04).
Timeline:
1. Allotment and commencement of trading of the Placement and Insto Entitlement shares won't occur until next Monday (29/04) (per the raising announcement).
2. Unsophisticated sophs and instos might wait until they actually hold the shares they were allocated before placing their on-market sell orders (i.e. regular exit of a long position). However, they risk SP erosion during the week prior to receiving their new shares.
3. Savvy sophs and instos who participated in the Placement AND who are only interested in a small (5-10%) stag won't wait. They'll sell as soon as practicable after trading recommences. But how can they sell stock they don't have yet on, say, Mon 22/04, with settlement due Wed 25/04? They borrow the stock and sell it (defined as covered Short Selling -- the only legal way to short stocks) to lock-in their selling price comfortably above 58c. At that point it becomes a a risk-free trade because their buy-in was already locked-in at a lower price.
4. Upon receipt of the newly minted Placement shares on Mon 29/04 they can use as many of those shares as required to return to their share lender, thus cancelling out their borrowed share position and closing-out their covered short. It's done without ever needing to wade back into the market to repurchase, in order to close-out their short position.
Zero risk, unless the SP quickly tanks below the Placement price when trading recommences (i.e. before they've been able to lock-in their selling price via shorting). This didn't happen, so all is well for the players of that particular strategy, if any.
It's worth noting that I'm not suggesting that this strategy was very widely employed (e.g. only ~5m shorted yesterday), but it's most definitely a thing. My post about this was in response to another member mulling over why there was increased short activity yesterday.
I agree with the idea that there's scope for players of this strategy to miss out on any upward price kick because of [insert reason]. However, that's not what drives this particular low-risk strategy, which is only designed for hit-and-run.
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