Pledge – agreed the MSB shorters have always won; and they have...

Pledge – agreed the MSB shorters have always won; and they have won from capital raisings.

But inside information?

In the US there are rules (Sec 105) prohibiting short sellers from participating in capital raisings. But not in Australia. So there is a loophole.

As I understand it the theory of this loophole is that the capital raising price “discount” represents the quantum of the informational asymmetry between the sophisticated (shorters) and the rank and file (mums and dads); where a share is dominated by retail.

Take the MSB share price before the CR – say around 35-45c with the CR at 30c. Arguably the discount is exactly commensurate with what you might imagine the difference to be between the sophisticated and unsophisticated.

Basically, other than MSB HC posters the world was able to correctly predict the discounted CR. Insider information was not required. I don’t think it’s a huge discount to where the share was trading.

But what about the shorts taken out prior to the second CRL at $1+?

$1 to 30c is certainly a big discount but in order to sustain an insider trading type argument there needs to be a mighty big conspiracy.

Company officials would have to have known that the prospects for approval were poor but none-the-less spruiked the chances of success in order to increase liquidity for shorters who could then a few months later close their positions in the CR.

I just don’t think that is a very realistic scenario.

So the upshot of what I think I am trying to say is that the big shorting money has been made on the lack of success; partners walking, trials failing and CRLs. Not shorting per se to pick up shares cheaply in a CR; because this later element is ultimately just a net sum game between the sophisticated trading against mums and dads.

So no inside information is required; but I do accept that because of the loophole; and MSBs apparent lack of interest about where the money comes from in its CRs … it is a terrible look.