RTO Churn Factor - LPE

Apologies for creating a separate thread but I think this analysis is sufficiently new to warrant one.

I have been reflecting on a few more recent reverse take-overs (RTOs) under which:

1. A significant number of shares have been issued in a public offer to fund the acquisition (ie. exclude issues to the vendor of the new assets as they are typically held long-term);
2. There was a significant period of churn upon relisting (ie. there was lots of volume but nothing much really happened price wise); and
3. An epic run followed.

It is apparent to me that the brokers that get issued shares in the public offer always have an incentive to sell immediately after relisting. They are almost always issued shares at much lower prices than the relisting price and are therefore immediately in profit. The share price cannot run whilst this is happening, as there is too much supply. In LPE's case, the public offer was at 2c.

This got me wondering - is there any relationship between the number of shares issued in the public offer (that need to be churned through) and the number of shares traded between the date of relisting and the start of the epic run?

Check out my findings:



This analysis shows that, prior to each of these stocks commencing their epic runs, the number of shares traded on average was 2.66 times the number of shares issued in the public offer. That is, substantial churn is required to flush out brokers before the companies begin to be valued on fundamentals.

For comparison, below is LPE:



This suggests to me that we still have a period of churn to go before LPE starts to reflect fair value.

For example, to reach the 2.66 multiple, another 289M shares will need to be traded. At the current average daily volume on LPE (a tick under 20M), this would take another 14 or so trading days.

Summary - this will run, but needs to keep churning first.