BOC, the new Gamestop

BOC & ADRs – SummaryBackgroundBougainville Copper Ltd (BOC) is a mining company based in Papua New Guinea. Until 2010, its shares were traded in the US through an ADR program under the symbol BOCOY. The program was terminated on December 7, 2010. Since then, BOC has only been traded OTC under the symbol BOCOF, with minimal volume.ADR Trading vs. Original SharesThe ADRs had a 1:1 ratio with the original shares. Research indicates that approximately four times more ADRs were traded than actual shares in the free float.With around 25 million freely tradable shares, this suggests roughly 100 million ADRs were traded over time – representing about 25 percent of the total shares, or 400 percent of the actual free float.Potential ‘Synthetic Short’If ADRs were not fully backed by real shares or were never properly unwound, this could result in a synthetic short overhang. These synthetic short positions could be hidden in investor accounts – a form of covert short selling.Impact on the Share PriceIf this structure becomes publicly known, it could trigger a short squeeze:Investors may start aggressively buying back or hoarding shares.Short sellers could come under pressure to cover their positions.Supply-demand imbalance could drive the price up rapidly.Additional ObservationsSaxo Bank offered CFDs on BOC until around 2018. After 2010, trading via BOCOF was extremely limited. The structural risks from the former ADR setup could become relevant again if the Panguna mine is reopened.ConclusionThere is evidence of a significant hidden short overhang resulting from the former ADR program. If this becomes public, a price spike could follow – especially if investors try to secure real shares and the shortage becomes obvious.