Originally posted by ecoool2:
↑
Hi all,ortunately, even though there are 20 trading days to go until the last Friday in November (including Melbourne Cup day because Sydney will be trading) ASX200 Index inclusion is highly unlikely for MSB in the December quarter rebalance. I think we currently need an average share price of at least $2.60 and probably closer to $2.70 over a 6-month period based on the assumptions below. Note that this calculation has a lot of moving parts, including what other stocks are doing, how many MSB shares the index committee decide to count in the Investable Weight Factor calculation, and new stocks which may list with larger market caps and thus pushing MSB down the ladder. Last time I wrote on this, I said that one of the targets of the shorts may be to stop MSB's inclusion in the Dec quarter ASX200 rebalance and that index inclusion is "looking more likely to be delayed until next year after recent price falls". It was an outside chance but numerically possible for December index inclusion in early October when the price was $2.47, but required another $2 or so jump in the share price at that time (ie to$4.47 and hold there) to get the 6-month average up to around $2.60 by end-November. That may have been possible if the price had kept rising in anticipation of the November 11 results and a possible partnering deal, but the average price over the past month has been only $2.00 and that means it would now have to average over $7.40 over the next 20 days to average $2.60 for the whole 6 months to the end of November. I think we need an average share price of $2.60 over a 6-month period for March quarter inclusion in the ASX200 based on the following calculation: 1. "Buffer" market cap to be included in ASX200 - you have to rank no. 179 or higher - ie around $1.0 bn to $1.05bn, but I allow for the possibility of 2 or 3 new stocks entering the index between now and March, which would push the requirement up to $1.05bn on current market caps. That is, it isn't good enough to scrape in at number 199, the calculation has a buffer zone to ensure the index isn't chopping and changing all the time. Conversely, you have to rank below no. 221 or lower to be chucked out. 2. Number of "Investable Weight Factor" MSB shares is 402.5m (ie I assume Silviu Itescu's shares, directors' shares, Tasly shares and NovaQuest are not included) 3. The other stocks aren't in a static share price position and many of the market caps which look much lower than MSB's right now are actually averaging a higher market cap than MSB since the end of May. 4. Right now, for inclusion in the December quarter index, you probably need a MSB price to average $2.70 (ie a market cap closer to $1.08bn for stock number 179) as several stocks around number 179 in the index had much higher prices earlier in the 6 month average than their current prices - this gives them a bit more buffer in the December quarter, but they will lose that protection in the March quarter rebalance. It also means December quarter inclusion is very unlikely. Shorts have had a big influence on October share price movements: What next?
Expand
Thanks @ecoool2 - another great post, MSB is a compelling buy atm with all the items that you have been highlightingMainly, the derisking aspects via the science and cash position...
But, I'm curious as to why the short positions has been rising to 30m shares in total
My guess is that it is a strategy to accumulate, and therefore a large portion of that 30m short position is covered via institutions that have a large share holding... apart from this I'm baffled why anyone would short MSB at this stage
Lets say you are an individual investor with no backing - would you leverage via margin loans to short MSB right now at $2.12 - what events would you foresee to make this a winning position? No way! What is your risks vs rewards analysis here?
Anyway, everything will come out in the wash as MSB continues to head onwards and upwards and derisking by the day
(20min delay)