I'm not so sure that this is the reason that the shorts are...

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krugerrands

418 Posts.

138

08/12/17

11:06

Post #: 29480090
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Originally posted by TerribleTadpole ↑

"..but its a one-off, and it doesn't effect the long term value of the business"

Well... maybe not of the business, but it can have a profound and long term effect on the share price! It's way easier to drop out of an index than climb back into it.

As you pointed out some funds will have to reduce their exposure to Vocus once they're out of the ASX100 because of the fund charter, risk strategy, etc. The key thing here is that those funds cannot buy back in until after Vocus re-enters the index. So the time line is this:
1) Price of VOC falls too low for ASX100 index.
2) Funds reduce exposure pushing VOC lower.
3) For VOC to recover it must climb by the combined 1) and 2) without the participation of those funds.

Did somebody say short positions were increasing ( @krugerrands , I'm looking at you )?
There's your reason.

My prediction (which I rarely get right) is below $2.50 again before the end of January.

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I'm not so sure that this is the reason that the shorts are increasing.... if that is the reason, then they should at least drop now that we have not been kicked out of the ASX100.

Either way, the index does seem to have been the reason the price dropped so suddenly and is surging today. Regardless of how much the shorts influenced that.

Call me stupid, but I never realized how much of an impact these indexes have on instruments - be it bonds, stocks.... seems so obvious now, but you don't really have easy visibility on this.

VOC Price at posting: $2.94 Sentiment: Hold Disclosure: Held
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0 Great analysis

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I'm not so sure that this is the reason that the shorts are...

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