Short Position

I recommend all interested SLX shareholders to keep an eye on the reported short position in Silex which got as high as 9 million shares however has been scaling back (now under 7 million shares). Whilst it is not linear, the reduction in short position does appear to coincide with the significant down days we had that pushed the smashed the share price down on volumes. That could have been one last push down to shake the tree and start accumulating.

Still representing around 4% of the company, this short position appears a significant exposure to someone in the coming months. With cash backing of Silex at around 35c per share (and low cash burn) there is not significant down side from here however should the Paducah announcement come out positive in a couple of months (as MG alluded a possibility at the AGM). The recent short covering supports my conclusion that they will want to reduce / exit the short position before the Paducah announcement comes out. If this is the case that is a lot of buying pressure to re-enter over the next couple of months.

I have noticed significant short positions like this in resource explorers and figured the shorter would need to be cover the huge volumes but to be disappointed that the company had issued them capital as part of a raise (corresponding to the short position). In the case of Silex that is simply not going to happen as there is no shortage of cash on hand. There is the possibility of the shorters picking up a parcel from a substantial holder such as BNY (if they are still holding) but that would still be a positive for holders because it would be a turning point for an end to the shorting / significant holder sell-off.

If the shorter does run the risk of waiting for the announcement (which is positive) that will literally put a rocket under the share price having someone desperate to accumulate 7 million shares. Things could really get out of hand.

Of course the announcement in Paducah could be negative however in any case I still don’t see the share price going below 40c and in any case the shorter would still need to accumulate which would be a lot of buying pressure in any case.

Interesting times over the next couple of months.

I am the Iceman!