Yes, thatis a very interesting question. How are 560M short positions going to exit?
I do notknow. I have had an interest in the mechanisms and machinations of shorting fora long time trying to discover their secrets and behavious for my own humblegains as a sparrow picking up crumbs. Honestly, the current situation isastounding and unwinding the position is going to be interesting to say theleast.
I assumethat the Operator(s) have a plan to exit with their hide and profits intact tolive another day. One would assume that the outlay of such vast sums of moneyin this campaign have rigorous and robust risk management plans and a way outis planned.
From midJuly (short position 182.9M, which is not inconsiderable in itself) has risento the current 560M. That’s 377M rise in positions over about 4 mths! Why?
IMO, togobble up as much stock as possible to make considerable profit at some pointin the future (short term – 1 yr cycles?). I do not think it is anything to dowith control of the company or take-over aspirations. It’s purely about makingmoney, and a lot of money from a valuable asset now and going forward. Theevents will probably be repeated again and again over the next 40 year minelife.
Our companyhas favourable characteristics and an environment to allow gobbling:
SOI are high – 3,000M – that’s 3 billion shares. More thanenough to go around to let maggots gorge their appetites so their little bodiesgrow fat and bloated – as long as the money flows for their preservation, or amargin call, or a trigger happens to create a breakout or squeeze.
Money - they have deep deep pockets for theircampaign.
Patience – they run long campaigns with set objectives –months, years long. Well organized and a plan.
Objective orientated and very focused – to accumulate x (calculated) numberof shares from weak hands (retail mostly, other operators, capital raise events,any means possible), then allow increase in asset value to a profit point anddistribute (sell off) over a period of time without decreasing the value untilthe cycle can start again.
Experience – they have done this many times to manystocks
The environment – investment in algos, bots, HFT, insto brokeragefee structures, corporate power and muscle, influence in markets, knowledge, intelligencenetworks, analysis experience extraordinaire, pycho analytical – they do yourhead in to try and make retail sell, etc
Back to thequestion – how will they exit?
I suspectthat it not going to be pretty due to the size of the outstanding positions. Theyhave been using the depressed commodity price as a basis to continue to suppressthe SP to allow more gobbling. Once this starts to rise, and it will, the assetfuture value will start to increase and more and more will try to buy – demand forshares will outstrip supply – and fast. I am seeing the next phase in both EWTand Wyckoff Method being set up now for markup (asset value rise). There hasalso been a distinct shift in retail/insto PLS share proportions.
However,they must have planned for exit to protect their investment, basic riskmanagement. I think the exit may have many facets to enable close of the hugenumbers outstanding. One part of the plan could be containment to allow orderlyexit, another part could be that those shorting also have massive long positionand it is a matter of using some of those longs to cover. The lenders maybe theshorter and the long accumulator! Different part of same org? A balance betweencover and keeping also a large amount of longs to meet the overall objective ofmaking profit. Might see some massive decrease as they shift longs to cover.Someone tried explaining this to me awhile ago here regarding how quarterly rebalancingworks – internally from one bucket to another within same org.
Dailyvolumes would suggest that is going to take awhile to close out these positions– 4 mnths to create the problem, 4 mths to get out of the problem? Slowlyslowly catch the monkey.
Really, don’tknow the answer to this interesting question and riddle. We live in interestingtimes. I think Dale’s answer to the question is probably correct – tread withcaution, things can change on a dime!
I am surethat there are others out there that have a far better handle on how shortsextricate themand other thoughts on how this may unwind. Interested to hearyour thoughts.
Sorry aboutthe waffle, time on my hands while on holiday. Thanks Team PLS.
Good luckall holders.
They ain’tgot or getting mine ha ha ha ha – the holiday now continues ………...
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