CU6 - ASX Charts, page-2255

Whilst CU6 is not the only, nor the most targeted, of ASX listed shares, there's some interesting lessons to be learnt from others that could play out for CU6. And IMO shorters could be caught out at any time!

I think the most likely scenarios that shorters are targeting is the likelihood of closing out positions with CU6 being removed from the ASX 200 Index, now expected, in June, just 4 weeks away.

But my analysis suggests that with the current Short position being slightly more than 25 million shares and less than 12.5 million shares available on removal from the ASX 200 Index. That means less than half of short positions can be closed out - sort of a rush for the door! I very much doubt that the Shorting has been done by 1 party, more likely many, and thus there may be a mad scramble by some as time gets towards the rebalance announcement date (first Friday in June).

One of the biggest issues is that the greatest build up of Shorts has been more recently, below $3.20, and in fact whilst the Shorting began at around $8 and are still well in the money, the vast majority of recent shorts were set in place much more recently, and thus my estimate now of existing shorts is a weighted average price of $3.93 - whole that's some separation to the current price, its getting closer and potentially could be a lot closer with a positive announcement. IF there was such a positive announcement the price could move a lot closer in a hurry, especially if there's a rush for the exits!

If we compare CU6 to the number 1 Shorted company on the ASX, ie BOE, which is at a ridiculous 25% of issued shares Shorted, ie around 106 million shares, the majority of the earlier shorts were set in place at much higher levels than current share price. But as a great example how things are starting to unravel there for BOE, the announcement today of just a presentation, that once again confirms favourable commencement of its Honeymoon Well operation, has resulted today in a 12% increase in share price. I interpret that to be partially related to Short positions commencing being covered - if that is the case the Shorting is likely to result in a chaotic scramble to Short cover in the next few weeks! (I took a position in BOE because of that ridiculous level of Shorts, and IMO Cu6 Shorting will end up similarly - noting quite a few CU6 shorters are already out of the money. Whether the same Shorter is comfortable because of much higher priced Shorts offsetting those out of the money we will never know.

AT has already suggested that Regal, who appears to be involved with a CU6 shareholding plus Shorting, will likely run out of shares before CU6 considers a fund raising. I interpret (and absolutely i may be wrong) that to be a veiled threat to close out Shorts before a positive announcement gets released - especially with AT also suggesting the trials remain going well and "we are not failing".

I certainly wouldn't want to be exposed with Shorts - obviously since I'm Long in CU6.