the beaches sp cfds and share consolidation

RIV39 said: I've wondered and wondered about Beach myself ... and I just can't come up with any logical answer to 'why'. I've owned them twice now, each time getting out to protect capital. They have every reason to be successful but unfortunately I think the traders have got a hold of it. Every time it makes a break north, they sell out and we're back to the baseline (or below). It won't last forever though - i'm watching them carefully for an opportunity to buy again once the economic conditions overseas become more stable. I'm sure they'll come good eventually - they have many more reasons to succeed than not in my opinion.

One of the theories I have been developing is that there are too many CFD traders in BPT. Not that I have any statistics to support this theory. The exaggerated Beach effect is a function of the low share price and significant liquidity. With the SP below $1 the way CFDs work means that the spread has a large percentage effect on movements. CFD providers protect themselves by using off market tools (puts and calls) that have on market effect. The details of this I havent worked out but if there is a preponderance of CFD longs without real buyers it can depress the SP.

Also I expect a number of holders to be covering their holdings by shorting with CFDs and may have found it quite lucrative to suppress the SP.even the 1cps dividend isnt a worry to shorters.

There was a blow out a couple of years ago (June 2008? - hints of short covering) but the share price has been under a very tight rein since. If Beach went through a share consolidation I think that it might cut down the negative effect of the CFD trading a larger share price would increase the potential for margin volatility while reducing percentage movements, increase the likelihood of fast traders taking a bath, increase the need for small traders to be well capitalised, increase the ability of large full price holders to influence the share price closer to fair/asset value.