@BaliHai A question I've been asked by a couple of friends...

@BaliHai

A question I've been asked by a couple of friends lately is: why would a large holder be selling 3mil shares at the moment (ie given where the project currently stands and given what appears to be a cheap SP relative to forecast earnings)?

it's a fair question, and this is my take currently.

1) it doesn't look to me like a holder that is selling because they know of anything catastrophic, if they did, they would just smash the market.

2) SFX has one of the lowest top 40 shareholder turnover that I've ever seen, in other words they are very loyal and committed, and over the years most major holders have increased their holdings. They are well versed on the economics of the project (thanks largely to Bridge Street's many consistent research notes over the last 5 years), and progress since YS became JV partner has been flawless. More importantly now, all indications are that production is on track.

I heard a mumble that recent sales were made at around the $900 mark ($US I presume), if that's on the mark then that's a tick on the pricing side. So there's no good reason for someone to sell based on fundamentals.

3) so that then leaves me to conclude something like this:. looking at the STA top 20 and SFX top 20 I notice a holder in both stocks, and their holding in SFX is around 3.5mil shares. I suspect they came aboard during the 50c raise last February. It's quite possible that STA is setting itself up to undertake a dilutive recapitalisation and this holder has decided to take the capital from their SFX investment and put it into an upcoming STA recapitalisation.

4) The market is SFX has held pretty steady even post the introduction of the 3mil shares for sale at 55c, so this is a pretty good indication to me that the selling is understood by those making the market and the scenario I've speculated on above fits the bill.obviously this is all just me speculating based on a range of possibilities, but not too far out there I feel.

5) so why hasn't the stock been taken out? I'm running with the theory that the buyers (for 3 mil shares) are currently sitting at 52, seeing no great rush to pay up, not until the port approvals are granted, the stone issue is clarified and/or production numbers are released. If enough of those outstanding items are ticked off before the seller drops to 52, then the 55c line will probably get snapped up, and hopefully off we go.

6) 3mil shares at 55c aside, the price won't do anything until enough buying comes in, and as I've suggested before the buying hasn't started, not because the SP isn't cheap, but because an insto buyer that accumulates 5million shares on market can't sell out of them easily given the current liquidity, and that's risky business. However when earnings of $100mil a year is reaffirmed by steady state production, that issue will be less of a detractor when a stock is trading at a market cap of 2x earnings.

Things could get interesting quickly, starting with the crossing of those 3mil shares which I'm looking out for daily.