Mostly written for the SY* thread, but includes reference to Core.
I am a substantial holder of CXO.
Hnr. Dr. Jim Chalmers
Federal Labor Member for Rankin
Treasurer of Australia
Mr. Joseph Longo
ASIC Chairman
[email protected].
A Current Affair
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AFR
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Rachel Waterhouse
CEO Australian Shareholders Association
A company's fundamental and technical aspects, no longer dictate its share price.
THE ASX IS BROKEN...
Not even a positive lead from Wall Street or rise in the ASX200 index, seems to be enough these days, to buoy some share prices.
Once the main lead, where a green market was the tide that raised all boats, it is no longer the case.
In increasing numbers, a company's short position, now seems to be the leading metric, which dictates its share price.
When shorting is proving to be the defining factor in a share price, surely there is a disconnect between the fundamentals of the market and the principles it is founded on.
Find any company who has high retail ownership, and time and time again, their SP seems to be governed by this increasingly utilised trading practice, which undermines the very nature of markets worldwide, and has nothing but a destructive influence on sentiment, confidence, investment liquidity(particularly retail) and share price. By extension, it heavily impacts income and capital gains taxes collected by the government from almost 9 million retail holders on the ASX, outside of their super exposure.(2020 ASX Australian Investor study)
TRADING PRACTICESNo: 8/00
Date: 13 November 2000
THE ASX itself, in the opening paragraph of its General Guidance Notes -
'A cornerstone of fair and orderly markets is that they reflect the forces of genuine supply and demand. THIS CONCEPT IS FUNDAMENTAL. ASX seeks to ensure that its markets are fair and orderely and free of manipulative trading.'
ASX
Yet a very rudimentary look at short positions versus share price of shorted stocks, paints a very different picture to the'fair and orderely market that reflects the genuine supply and demand' as stated by the ASX.
Even one of the biggest retailers in Australia, is not immune. Coles chart below-
COL
2022 Annual-
39.4 billion total sales revenue
1.9 billion EBIT
Net profit after tax growth 4.3%
DPS 63c
As for the current top 6 shorted companies on the ASX, I have posted the sp v short positions of these below.
They illustrate the almost perfect inverse relationship, that a company's share price has versus its open short positions.
Most of these companies' fundamentals speak for themselves, and I encourage holders to investigate and come to their own conclusion. No doubt, you will come to the same conclusion I have.
I have included a brief description of their most recent financial situation. This is just a brief snapshot with minimal investigation.
However, as a well-versed holder of Sayona with a substantial investment, I feel I can discuss and highlight, the increasing strong fundamentals, versus a decreasing stock price.
As stated earlier, technical and fundamental analysis, as well as broader market movement and sentiment has no effect on the market capitalisation and share price.
The only metric that seems to have any impact, is the short positions, and more recently, when the institutional holders realised Sayona may exit the ASX 200, and massaged the share price in and around the December quarterly rebalance, to ensure its inclusion, and continued pillaging of its retail holders.
In August reported Over $1 billion in revenue.
The travel giant recorded a 154% improvement in revenue for FY22, returning to profit in the second half.
Yet the share price only improved once the shorters started closing positions
- BET
Revenue came to $91.7 million – a 371.1% increase on that of the prior corresponding period (pPosted an after-tax loss of $89.2 million – 411.1% deeper than the pcp’s $17.4 million loGross profit lifted 550% to $66.3 millEarnings before interest, tax, depreciation, and amortisation (EBITDA)came to a $86 million loss – 374% deeper than the pcp’s $18.1 million lAdjusted EBITDA, however, reached $2.2 million – up from a $2.9 million loss The company’s three divisions each posted higher revenue in FY22
- PPT
Revenue of $767.7 million– a 20% improvement on that of the prior corresponding period (pcp)
Average assets under management (AUM) lifted 41% to $107.2 billion
Delivered earnings growth in all four of its divisions
Declared a 97-cent fully franked final dividend, bringing full-year dividends to $2.09 per share – a 16% improvement
- MP1
As per the latest Income Statement of MP1,the Net revenue increased by $31.45M (40%)compared to the previous period. The operating income in 2022 increased by $1.39M (3%). The net income as per the annual report was -48.49M which increased by $6.50M (12%) compared to previous year.
- ING
During FY22, Ingham’s (ING) faced a number of challenges which led to a decline in financial results
The poultry and fodder supplier reported a 16.6 per cent EBITDA decrease to $370.4 million which it says reflects the “disruptive” impact of COVID-19 and increased cost of operating
Net profits fell just under 58 per cent to $35.1 million and the company reported a final dividend of 0.5 cents per share, taking the total dividend for FY22 to seven cents per share
Despite the challenges of cost inflation, reduced production and higher input costs, Ingham’s is proud of the resilience and commitment it has shown and feels prepared to navigate FY23
- SYA
SAYONA
The September rebalance was an exciting one, for Sayona shareholders.
It was their first inclusion into the top 200 companies by market cap, on the ASX.
The 3rd quarter had proven very fruitful for the company, and the share price had increased from 12c to 37c.
The price sensitive announcements in that lead up were-
- Positive PFS for NAL
- Oversubscribed placement to fund NAL
- Lithium targets identified at MtEdon
- New lithium discoveries at Moblan
- Sayona and Piedmont formally approve NAL restart
- Excellent quarterly and cashflow accounts
- NAL on track for first production
- Quarterly balance with Sayona admitted to the ASX200.
So, the scene was set, and commensurate with the increase in share price.
An Australian company, with the biggest hard rock resource in North America.
Fully funded and at that stage nearly fully permitted.
With a brownfield site in Quebec which was a previously operating mine and concentrator, in one of the worlds and arguably North America's finest mining jurisdictions, with customers on their doorstep and an advanced plan to be the first lithium and SC6 producing facility in North America....by March 2023.
An existing offtake partner, who even with a sub optimal offtake, still ensured underwriting the project, and still delivering profit.
The facts were, the project was heavily derisked, fully funded and almost 100% fully permitted which it now is, with increasingly strong fundamentals, a record lithium market, yet the share price went down.....why?
As demonstrated on Sayona's above chart, the ONLY metric that increased at the time, was short positions. All other fundamentals were improving, and as we know today, Sayona is on the cusp of production and robust revenue generation.
Even the Dow, S&P500 and the ASX had late rallies in this quarter. yet the Sayona SP stayed stagnant, green or red day.
Was this 'forces of genuine supply and demand.?'
ALL ORDS v SYA
So, improving broader market conditions, a hugely derisked project, improving fundamentals, yet a stock price decline.
As you see form the chart the ONLY increase, around late September, the ASX200 inclusion, was a 900% increase in short positions.
The share price had an immediate decline, inversely proportional to the opened short positions.
As per the examples above, similar patterns and have emerged in numerous stocks.
It has become such a common practice, many shareholders expect it and almost consider it a right of passage.
I have personally seen and followed it with Vulcan, Core lithium and Pilbara, just to name a few. Wave after wave of co-ordinated attacks.
Some are even driven by unscrupulous organisations, masquerading as brokerage house reports, who use semi factual truth, to distort and manipulate to their advantage. This happened recently, with Vulcan and Lake.
Continual manipulation. It seems to be gathering momentum, and their trading activity more brazen.
Again and again, shaking the liquidity out of the retail investor.
So where is the governance?
Where is investigation into these practices that seem to be in contravention of the principles the ASX sets out?
A cornerstone of fair and orderly markets is that they reflect the forces of genuine supply and demand. THIS CONCEPT IS FUNDAMENTAL. ASX seeks to ensure that its markets are fair and orderely and free of manipulative trading.'
Is this practice a cornerstone of a fair and orderly market?
ASIC
Further implications of the future impact are not realised.....yet.
Both from a personal investor perspective, and as a tax windfall for the Australian Government.
The erosion of private wealth on a mass scale, has not yet impacted the economy.
- Less Tax, greater pensions and support.
- Lack of savings, therefore less spending/less GST
- Loss of super, in managed and self managed funds, will all cumulatively add to a weakening economy and greater reliance on welfare/pensions
If this corrupt practice continues and grows, how much liquidity is stripped from private retail accounts?
Middle class Australians, who pay the majority of the taxes and are a major support for the Federal economic ecosystem.
The spare savings that one invests, in the hope of building a more secure future for the individual and their families, is being eroded and with the continual losses made, there is no income or capital gains revenue, and these losses count against any future possible profit/tax revenue, negating them.
The rise of the self-managed super fund, allowing investment directly into the ASX, has almost become a lottery, dependant on the whims of these short attacks.
Superannuation that should be held, to provide secure economic independence when one retires from the workforce, is being transferred to the ASX, where the shorting is then able to snatch some, maybe all of these funds...a new revenue stream for these institutions.
So where is the governance?
Is ASIC and the Australian Government's lack of investigation and action, leaving it vulnerable to a class action from millions of Australians, for their lack of intervention and governance?
This practice certainly does not lend itself to the primary principles of the ASX, and therefore should be enforceable under law, Business Rule 2.2.4.
The last reference by ASIC I could find ws April 2020-
We’re taking all necessary actions to maintain open markets that operate in a fair, orderly and efficient manner. While there’s been significant price volatility in recent weeks, markets have remained orderly.
We continue to monitor developments here and in other jurisdictions, including actions in some jurisdictions to further restrict short selling.
Covered short selling is permitted in Australia, subject to certain reporting and disclosure obligations, where the seller has a ‘presently exercisable and unconditional right to vest the products in the buyer’ at the time of sale (through a securities lending arrangement). This differs from the ‘locate’ rule in many other jurisdictions, which allows the seller time to borrow stock after the transaction is entered into.
Naked short selling is the practice of selling certain financial products without ’cover’. It’s prohibited in Australia unless an exemption applies. This is an important safeguard against settlement failures, disorderly markets and any knock-on impacts to the financial system.
ASIC received $422 million from the Australian Government in 2021-2022, and I wonder how much of these funds went into investigating the darker side of teh ASX?
On page 90 of their 2021-2022 Annual Report, they do mention-
ASIC’s work in this sector during 2021–22 included a focus on market manipulation occurring via social media forums, online financial influencers, and new market integrity rules.
There was a concerning trend in the second half of 2021 of social media forums being used to coordinate ‘pump and dump’ activity in listed stocks, which may amount to market manipulation.
Clamping down on the pump and dump crews, yet no mention of co-ordinated short attacks...
AFR- Blue Sky Short Attack-2018-
Chanticleer believes companies that are most vulnerable to attack from activists are those that are fast-growing, have lots of illiquid assets or have corporate structures with any semblance of complexity. Logic says superannuation funds and banks, which have a mismatch between assets and liabilities, would be ideal candidates for attack from the unscrupulous.
The Blue Sky attack is a timely reminder for boards that short sellers and activists do not play by the old rules. For example, in the past when a company wanted to value its assets it commissioned independent reports from competent experts. These experts must reveal their full qualifications, they are required to use audited financial information and must provide a sound basis for their opinions.
AFR July 2022
With forecasts of further falls, he says many have cut and run and may be waiting on the sidelines.“They will feel good now, but when the market eventually turns they will miss it and then wait for the pullback that will probably never come.”
In fact, retail buyers and institutional hedge funds oftenfound themselves in battleas heavily shorted shares had among the highest levels of retail interest.
Shares in which retail investors account for a high share of turnover are now among the most shorted stocks by institutions, according to Morgan Stanley’s research.
Rachel Waterhouse, CEO of Australian Shareholders Association.
These include Betmakers, Flight Centre, Kogan, Zip, Mesoblast and Imugene. That’s in addition to lithium explorers Vulcan, AVZ Minerals and Lake Resources.
Kardinia Capital, a fund that shorts shares as part of its strategy, said the market had switched to seeking current earnings, not companies that were losing money or would only make profits into the future.
“Loss makers have no valuation support and 17 per cent of ASX300 are loss makers, even if some are temporary like Flight Centre and Webjet,” the fund said in note on Friday.“Some don’t even have any significant revenue. This basket is where we are hunting for short ideas.”
Mr Andronis added that retail investors had, in fact, gravitated away from speculative bets on hyped up technology companies and beaten up travel sector firms in favour of less racy “banks, miners and broad-based exchange-traded funds”.
The change in the stocks that retail investors are buying has shown up in Morgan Stanley’s quarterly research that tracks where the retail dollars are flowing.
Online retail investors, Morgan Stanley said, accounted for 7.4 per cent of total market turnover compared with a peak of 12 per cent in February 2021. This market cohort continued to favour tech stocks, although it had shied away from buy now pay later, while share of trading in all sectors other than materials had declined.
But Morgan Stanley research revealed online retail traders remained a force, particularly in certain shares. Overall retail investors were net buyers of stock and have been since the pandemic, even as institutional investors have been net sellers.
The ASA represents the interests of 5800 retail shareholders. Ms Waterhouse said a strong retail investor base added diversity to the capital markets and if well-supported, “provides opportunities around wealth creation and providing more control”.
Mr Andronis echoed that sentiment. He said the regulator welcomed the growth of retail investor participation in the sharemarket.
“It’s good to have a broader pool of capital and participants,” he said. “Market volatility is part of investing and highlights the importance of diversification and managing how much you invest.”
ASIC, he said, is focused on making sure investors understand how their assets are held and the custody arrangements, and that a slowdown in activity may create some additional risks as entities compete for business.
“For example, we might see more aggressive digital engagement practices to drive excess trading,” Mr Andronis said. “We are seeking to ensure that the design of products is fair and if the marketing of products is appropriate.”
Mr Andronis said ASIC was keeping a close eye on neo-brokers that he described as “innovative and able to develop and adapt quickly”.
From the ASX's own website-Nov 2022
Helen Karlis, partner Domestique Consulting: The first thing we do in all cases is to review the target company’s disclosures and identify ways of enhancing transparency to comprehensively rebut the allegations in the short reports.
The next step is to distinguish between short reports that genuinely enhance price accuracy and liquidity in financial markets and short and distort attacks that are akin to market manipulation.
In July 2020 we were brought on to advise WiseTech, which at the time had been subjected to nine months of short attacks. We had a number of other clients in a similar situation and noticed similarities in the modus operandi so decided to undertake some research in conjunction with Sydney University to analyse short activist attacks on ASX-listed companies over the period 1 January 2015 to 31 August 2020.
The results of the research were extraordinary; there were clear instances of short and distort activity. With Wisetech for example, 12 short reports were issued, often days apart, during trading hours with one report, issued in the middle of their AGM.
Feb 14 2022
SEC goes after Goldman Sachs, Morgan Stanley and other big hedge funds-
Federal investigators are probing the business of block trading on Wall Street, examining whether bankers may have improperly tipped hedge-fund clients in advance of large share sales, according to people familiar with the situation.
The Securities and Exchange Commission has sent subpoenas to firms including Morgan StanleyMS,-0.52% and Goldman Sachs Group Inc.GS,-1.33% as well as several hedge funds, asking for trading records and information about the investors’ communications with bankers, some of the people said. The Justice Department also is investigating the matter, some of the people said.
Investigators are looking at whether bankersimproperly alerted favored clients to the sales before they were publicly disclosed and whether the funds benefited from the information—for example by shorting the shares in question. (In a short sale, an investor sells borrowed stock in hopes of buying it back at a lower price later and pocketing the difference.)
Shares of companies selling stock often fall because of an increase in supply hitting the market—and they do so frequently in the hours before a big block is sold, a phenomenon that has long raised questions on Wall Street.
The latest broker data for Sayona, shows both Morgan Stanley and Goldman Sachs on our books, as well as Credit Suisse, JP Morgan, Citi, State Street, Barrenjoey, Macquarie, Merril Lynch, UBS etc..etc...
So where is ASIC?
These corporations are active on the ASX...very active, where is the investigation in Australia?
Are we ripe for the picking due to the lack of oversight and governance?
Now I am a regular, blue collar, mum and dad investor.
I do my research and invest in companies I believe have a bright future.
The ideal target for shorters, who want to take MY SHARES.
Who manipulate the companies I invest in, in the hope of diminishing my research and resolve, in the hope I sell.
Once you tune into the tactics, it's very clear to see.
And I am just a regular investor.
Now if I can see it, why can't ASIC?
You would think $422 million dollars could buy you a very thorough investigation.
One that could clear out these practices from the ASX, help keep the market fair, orderly and free of manipulative trading.
And probably, net the Federal Government hundreds of millions of dollars in fines and billions in tax revenue.
Now, my primary aim is to keep the market fair, orderly and transparent.
But I guess this is one of those situations where it is a win win for the Australian public, and the Australian Government's coffers.
So, Jim Chalmers and Joseph Longo..... how about it????
(20min delay)