This is the MSB price over the past 2 years.
The yellow line is the 1 year, or 256 day moving average (April 5 in 2018 was 256 trading days ago as Easter had already occured).
You can see that the 1-year average price has been in the range of $1.50 to $1.60 since June last year; and that it was around $1.50 back in April 2017 as well. The blue line, 2-year moving average price has therefore been fairly stable around a similar band.
The red "volume by price" bars on the left tell us a similar story, ie in the past 2 years the highest volume has been around $1.50, with the bulk of the trading between $1.25 and $1.75. Note that many of the big transactions in the past 2 years have occurred at $1.50 - eg Teva/Cephalon sold its first tranche of 29m shares at $1.50 on Oct 24th 2017, and the August 2017 1:12 issue was done at $1.40 to raise $A50.7m. Teva then sold the rest of its stock a little lower. So there has been a lot of distribution around the $1.50 mark in the past 2 years.
So, it has been fairly safe for shorts to sell above $1.75 and buy back below $1.25. In fact, there has been very little volume traded below $1.15 and above $2.20 - so they set the limits for trading large volumes. Within that range, the more adventurous ones seem to be hunting around $1.50 on the sell side if they think there's going to be a big line available either through someone selling lower (eg Capital at an average of $1.18).
The skew in the tail in the red bar graph (above) is towards higher prices, which is the risk for the shorts if there is a meaningful announcement. They are obviously betting there won't be any major announcement within their trading horizon and that they can continue trading this range.
The share price rose through $1.50 on April 2nd and gross shorting activity picked up to 211,000 and 468,000 on Wednesday and Thursday.
Gross shorting had been very small through February and March except for a couple of blips up on the 19th (442,000 gross shorts) and 26th of March (320,000 gross shorts). Unsurprisingly, the price had jumped to $1.50 on 19 March and there had been big volume in the market in the prior few days - 14th March 4.46m shares traded with the S3 XT late trade at $1.15; 15th March 4.56m shares traded with the crossings probably related to this trade; 18th March 2.3m shares traded as the price rose to $1.40 in response to the realisation Capital had probably finished selling; 19th March 2.8m shares traded as the share price momentum continued to $1.50. The blip in gross shorts on 26 March was likely due to the renewed price strength and maybe people taking advantage of the announcement that JCR had filed to extend marketing approval for use in EB in Japan, with volume that day a solid 1.26m shares traded.
Gross shorting tends to be correlated to big moves in the share price and big volume traded in the market. It is more an indication of the short term trading of shorters who move in and out for a few cents. The net short position is a better reflection of the big short positions - however, sometimes the big net short positions move between accounts at the same prime broker and there isn't a reporting of the trade through the market - or it can come later - so the net shorts can report confusing moves that only become apparent after the event (or never).
The net short continued to fall up until the latest reported figure of 31.04m net short (6.22% of issued capital) on April 1st (the day the share price hit $1.50). I wouldn't be surprised if net shorts stop falling soon, or as they approach 6% of capital, if the share price hovers in the $1.40 to $1.50 range. I'd only expect another spate of shorting if daily trading volumes pick up again above 1.2m shares per day and the price rises back above $1.50. If there's a huge shoot up in the share price due to a partnering deal, the shorts will let it go and only return when they sense the buying has exhausted and then they'll try another attack (but that may be from a price well above $2).
If volatility/nervousness send the price back down to $1.15-$1.20 you can expect the shorts to cover and thus support the share price. If there's a bad announcement, then the price could move back into the $1.00 to $1.15 range - though the news due in the near term is likely just to be confirming what we already know. I can't see any justification for some of the more colourful claims of people who sold out at lower levels a few weeks ago and claimed they'd be able to buy back in at 85c.
The Capital substantial shareholder notices and their US filings made it apparent what had been going on in the big moves in the net shorts - however if Capital had held less than 5% of the MSB issued shares, we may never had known what was really going on.
This is not a conspiracy by large funds. This lack of transparency/understanding is the same for major funds as it is for all retail investors on HC. Large shareholders usually don't comment on their buying or selling intentions as it makes it more difficult to get set if they telegraph their moves. Most of their trades go "through the pipes" at broking firms and they can't be identified (and even if the brokers know who is dealing, there's no way they would disclose that or they'd never deal for that client again). The instos will sometimes (but rarely) approach the company direct on a highly confidential basis if they want to deal in large volume to see if they can get a placement or (very rarely) to see if the company knows of a large buyer so they can get out. Usually the company doesn't know what is going on either, especially if someone is lending stock and if nominee holdings are involved. You will sometimes see a large insto making a comment that they are buying more stock, but usually they will have most of their position on board first. Of course there have been some examples in the past of instos or company management declaring they are buying a stock - the desperate guys who beat their chests and say "the stock is too cheap and if it doesn't go up I'll buy it myself"...see past examples like Rodney Adler etc. Elon Musk took it one step further in his infamous $420 takeover comments. However, these sort of comments are hardly ever made by big instos and if they were, there would be questions of market manipulation raised.
On the other hand, short sellers DO tend to telegraph their holdings and intentions to sell (after they have already put on most of their short). That's because the short sellers need others to come in behind them and sell and push the price down. They usually try to release highly negative reports on the company at the same time (often with some truth in them, but more often over-hyped). They also tend to "hunt in packs" more than the long only holders. This is for the same reason, bringing in more shorters will push the price lower. However they are highly competitive and they don't really trust each other (a shorter may convince another one to sell and then they may buy back for a small profit using the other guy's selling so they can cover - it's a snake pit out there!).
Mesoblast remains vulnerable to shorting because it is still burning $22m cash per quarter and there are no profits or dividends for shareholders to rely on to underpin the share price. Of course, a major partnering deal would dramatically turn this around, but the shorts obviously are betting that this won't happen. Approval by the FDA even for a smaller product like aGvHD would also be a huge vote of confidence in the cells, manufacturing, trial design and commercialisation potential. That makes this stock very volatile and risky both for shorts and longs.
Another mega-deal would blow the share price through the roof as it did after the December 2010 deal with Cephalon - which lifted the price from $3.50 to $10 (NB it ran from $2 to $3.50 in the three months prior to Cephalon - although it completed the Angioblast acquisition in that period as well). Cephalon was a huge deal - paying $US130m up front plus $A223m for a 19.99% placement at $A4.35 per share of 55.786m shares (plus a contingent $US1.7bn for regulatory milestones, plus a commitment to fund the phase 2B and phase 3 trials and commercialisation). The Cephalon deal was for world-wide exclusive rights on cardiovascular and Central Nervous System indications - it was a company maker - and the number of shares at the time was half the number on issue now, so the leverage was double back then what it would be now.
If another deal is done on the Cephalon scale, we could expect to see $A180m up front (the $A has fallen from 98c to 71c in that period) and any regulatory milestones would be much closer to being met with our phase 3 trials completing around the end of this calendar year to early 2020. I doubt the Prof would want to do a similar placement of 19.99% of the capital to a partner at anything like these low prices (compared with the $A4.35 that Cephalon paid), and he wouldn't need the extra cash given the big upfront plus milestone payments. Perhaps a smaller 5% placement at a premium - maybe nearer $2 (similar to the $1.86 paid by Tasly). That should be enough to kick the share price up to $5, given the rise to $10 last time with hald the number of shares on issue.
MSB Price at posting:
$1.41 Sentiment: Hold Disclosure: Held
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