Another post with another graphic to see where we are re the short position.
Once again, sorry for the overcrowding of the price action with the callouts. Can't be helped.
Shorted stock reduced by 52.3M on Wednesday, leaving a further 147.4M shares still shorted. There was a slight reduction on Tuesday's position on Wednesday, but nothing to write home about.
This means that every share still held short is now in negative territory. Why? Why continue to hold the number of share short?
Buying these shorts back at this price means that those who hold these share have to recognise the loss for one thing. It would also mean that the share price would move higher, given how tightly held this stock is. Holding these shorts at this level also means that the notional loss is just that, a notional loss. However, also reducing on market buying has the effect of holding price relatively static. As we can see with the price action over the past couple of days.
ALB have stated that they are comfortable with the offer they have on the tale, therefore, holding at these levels, playing a wait and see game, I would suggest, doesn't really harm them. They can pick up a few extra shares from those share holders who are in the sock for a quick buck get frustrated and sell out, take their profit and move on to the next opportunity.
The downside to the above strategy for ALB, because it is completely unknown, is who might be in the wings or what other news might drop that upsets their plans. Hmmm. If that happens the stock could re-rate even higher. Shorts would be further burned, potentially hitting margin calls, further pushing the price higher, and so on and so on. I, for one, love the intrigue of the uncertainty. This is a game of asymmetry - ALB know what their plans are and the game they are prepared to play to win at that game - LTR also has many cards up its sleave and therefore can play them as each hand in the card game drops. The market could dredge up a completely out of the box event, like a white pointer hunting its prey from the deep ocean: the current predator (ALB) and prey (LTR) completely unaware of its presence (possibly not to the LTR BoD but certainly not we shareholders).
Should ALB not be successful in its takeover, there is another issue that no one has really addressed (not that I have read - I don't have time to read every post). That is, currently ALB has 4+% of LTR shares. If it is not successful, then I have to ask the question of whether the they will stick around and, therefore, what do they do with their currently shareholding? Selling out, even over a number of months will depress the share price, which will the reinvigorate shorters, further depressing the share price. This needs to be kept in mind in my view. Also noting that this would only have a short-term impact in the scheme of things.
There has been a huge amount of discussion on whether the offer price is good value or not, or that a more "reasonable offer" of $3-$3.5 represents "fair value" for LTR shareholders at present. Maybe it does. Maybe it doesn't. The simplest way to determine that is to do a net present value calculation for a parcel of shares sold at "fair value" compared to holding the same parcel of shares into production, adding into the equation the stream of income from the dividends received over, say, a 10 year period. I have done that calculation for the parcel of shares that I and my wife hold and have decided that I am more than happy to continue holding my shares. Please note that I have not provided any numbers here as it would be considered financial advice and the post would be moderated.
Then the issue of unknown risk is raised, re having to wait for LTR to commence production - construction delays, cost increases, reduction in ore prices, labour shortages, bad weather, you name it. Apparently, we should sell because the "fair value" share price on offer is sufficient to compensate for these risks. (Note - risk = fear - will something happen or won't something happen, and predators love fear.) As many have noted, with every passing day LTR gets closer to production, therefore risk (fear) is dissipating. At some point the level of risk (fear) reduces to the point that it no longer impacts the range possible outcomes in any meaningful way. The rusted on barnacles within the LTR share registry, I absolutely think, have factored these potential risks into their calculations to hold or not to hold the stock - so... they hold.
So where does this leave me? I am more than comfortable to hold; love the fact that the shorts got smacked and are in a negative position; can't wait for production; will participate in a capital raise (if I have to if costs blow out); can't wait for further good news stories from LTR; and am behind the BoD and the decisions they are making.
IMO DYOR
(20min delay)
