Ann: Becoming a substantial holder, page-21

Classic Tommy. Never let the facts relating to the bigger picture get in the way of a good story. Love your work, son!  

For those who are interested and are following along (not you SB - you can tune out now), out of morbid curiosity I parsed the raw UBS data (from early July to 6 Dec) into a spreadsheet earlier today and then ran some numbers. It appears that UBS has been able to pull ~$350-$380k out of the market with their on-market activities in POS since the Sept rights issue.

The guts of that gain (~$340k) came from selling down 60m shares in block trade sales, which were previously identified and discussed here on HC. The block sales were:

- 40m sold on 10/10 for 5.2c.

- 20m sold on 29/10 for 4.5c.

Note that these sales came first. More on this later.

The repurchases to (presumably?) top-up the holdings back to previous level have (so far) mainly taken the form of 3 x large block purchases for a total 50m shares, with the remaining ~10m balance being made up of smaller purchases along the way. The block purchases occurred as follows:

- 20m @ 4.6c on 20/11 (the beginning of SM's very narrow analysis window - the rose tinted one).

- 10m @ 4.5c on 23/11.

- 20m @ 4.1c on 06/12.

- 10m shares of various parcels at various prices.

From 2 Oct (i.e. immediately after the trades that gave rise to the original Form 603 for 144.6m holdings) until 6 Dec UBS's trading volume has been as follows:

- Sales: 61.8m shares.

- Purchases: 59m shares.

This slight shortfall in re-purchases to-date (2.9m shares, rounded) explains why the current updated total holding is currently a little less than it was at 1 Oct (i.e. 141.7m now v 144.6m previously).

As we all can see from the associated transaction spreadsheet there were a bunch of small sells/buys along the way, but what I've written above captures the essence of the bigger picture in trading activity.

Interesting also to note that the sales came first and then repurchases followed. On the face of it one would say they conducted a short-selling campaign. BUT they sold 60m shares, yet had only borrowed 40m shares. What gives? Well, my interpretation was that they probably conducted a "effective" (<--keyword), but not actual, short-selling campaign using shares already held in their long portfolio (i.e. not using the borrowed shares). It's just my interpretation and I'm not claiming this as fact. However, doing it this way would enable them to by-pass the short-selling reporting requirements if they were not using the borrow shares to sell. It begs the question of why they borrowed those 40m shares in the first place when they already had ~102m long holdings in the portfolio anyway (i.e. more than enough to sell-down 60m from). Short answer: I don't know. Having those borrowed shares on their books, but not using them might have something to do with portfolio insurance and hedging their bets.

Anyhoo, there it is. I think it can most likely be argued that UBS didn't conduct a short-selling campaign per se, but it is clear from the evidence (to most of us, at least) that they offloaded a decent chunk of their holdings at higher prices (in October) and then bought back at lower prices (from 20 Nov, onward). And in the process they pocketed ~$350-$380k. It sounds like a decent chunk, but relative to their original overall holding I find myself asking whether it was worth their trouble - especially in such very thinly traded stock, which could have presented difficulties in repurchasing if the NP had turned up unexpectedly. It looks like their campaign (this one, at least) is all but over.

So, UBS started October with 144.6m shares and in early Dec they (currently) have 141.7m shares - after having churned through ~120m of volume (i.e. 61m sales and 59m purchases).

And to think that there is at least one commentator out there who thinks that UBS was mounting some kind of concerted defensive accumulation campaign against a known predator. What a pity that the actual data doesn't support that thesis. Turns out that UBS was doing what UBS does best...

I considered uploading my spreadsheet for all to see (you know, in the interests of transparency and all that), but I have decided to present the findings and encourage those who are interested to check for themselves using their own efforts (source information is at the end of this announcement). I'm happy to answer any constructive questions from anyone who has already first made an effort.