Thanks for your reply. I don’t think they can do anything with price if they just “borrow” without trading them, unless they know L1 was intending to sell their 5%, and they borrow it to stop that from happening, and L1 is happy with the interest CS pays, but anyway, just done gym and brainstormed a couple of scenarios, sorry if some (or all) has been covered, here’re my 2 cents,
Short position scenarios:
- Assumption: CS borrows to short BGS. Firstly we need to be clear that one can make profit from borrowing by shorting, unless you short then long then short but still, you need to short to make a start, common sense. However, from shortman report (assume we can trust it), it shows that short volume in last 6 months is negligible. This means if anything, CS has been accumulating shares in last 6 months instead of shorting. If CS hasn’t taken a short position at $0.8-0.9, unless they know something negative that we don’t know, otherwise why would they take a short position at current price given the current resource level and positivity? But if they know something negative that we don’t know back Jan 2018 (they started borrowing before that, they only need to release transaction for the recent 4 months), why wouldn’t they take short position at $0.8-0.9? My conclusion on this point is they don’t just borrow to simply short
Long position scenarios:
- Assumption: CS borrows to long BGS - not possible by principle
Other scenarios:
1. Assumption: CS borrows under the agenda to assist with TO. An interest party may instructed CS to prepare for a potential TO, this may explain why CS has been accumulating without trading - they are waiting for the window that TO is about to be considered, drive down the price like crazy and get people puzzled and panicked in return for a cheap deal. However, as far as we know, we have a reasonably tight register, and there’s no pull out from major shareholders recently, I don’t think 5-6% of shares are powerful enough to manipulate the valuation and sentiment. Also, if this is the agenda, I’d expect the traders to be more low key and careful e.g. keep holding <5% so they don’t expose themselves. My conclusion on this point is the assumption is possible but unlikely.
2. Assumption: CS borrows to gain more voting power - not possible, as stated in agreement: “voting rights to be exercised in accordance with lender’s instructions”
3. Assumption: CS borrows to cover the identity of actual holder - not likely, I’d assume one can easily hide holdings by creating multiple accounts under different names?
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There’s no doubt that this is not a simple and ordinary operation, however based on:
- CS has been accumulating (borrowing) for at least 4 months
- CS didn’t take short position at high price (or at all)
- CS doesn’t have reservation to have itself and its lender identified
- As far as we know, BGS is heavily undervalued and full of positivity
My guesstimation is whatever it is, it should be positive, otherwise it doesn’t make much sense. I’m 5 years in stock trading and 2.5 years invested in BGS, whatever it is, my firm belief in BGS will only be firmer, and this case will eventually be part of my education book.
PIK
BGS Price at posting:
50.5¢ Sentiment: Buy Disclosure: Held
