7.2.1.16.5 CONCLUDING COMMENTS: Trading and reporting data strongly suggests that the market in Linc Energy shares has been compromisedthroughout the period covered by research.Issues of concern include:
Poor price performance for most of the 3 years of trading reviewed, including a grosslyundervalued share price during May 2012;
A dysfunctional market with heavy short selling leading to lower prices and short covering occurringoff-market without price impact immediately before a dramatic rise in the share price;
Trading anomalies with persistent mismatches with official data regarding short selling andsecurities lending;
Concerning anomalies associated with substantial shareholder data where the trading of affiliates iscontradictory to the profile of their broker in the market and where collusion between brokerslooks to have taken place in the building of positions and the selling down of holdings, and;
Issues with the bulk of institutional trading being camouflaged amongst the largest retail broker,Commonwealth Securities perhaps to take the spotlight off the impact that large institutionalorders have had on the market;
Trading issues and transparency issues associated with high levels of trading churn back and forthbetween sophisticated investors but with only marginal changes to beneficial ownership;
Control over pricing levels as suggested by:
Anomalous auction trends, and;
Anomalous down tick trends;Finally, despite all that has been identified through research into trading and reporting data, there is theissue of regulation or more particularly, an apparent lack of regulation. All trading irregularities identifiedhave obviously been sanctioned as no regulatory queries have ever been raised publicly concerning thecompanies reviewed by research.The situation seems to suggest that rorting, unfair trading, insider activity, and market manipulation areeither absent from the market and that there are other explanations to address widespread anomalies orthat the system actually tolerates such activities because of overly flexible trading guidelines and an inabilityby regulators to deliver fair and transparent markets under current arrangements.If there are other acceptable explanations for persistent trading irregularities and data anomalies then theyshould be made known by those responsible for supervising our markets so that investors may be fullyinformed. Only then can investors make appropriate judgements about the risk profile of investments andthe suitability of the share market in attempting to achieve long and short term investment objectives.Currently, retail investors face a three way squeeze in the market
Firstly they are subjected to an extremely un-level playing field when attempting to buy and sellbecause of sophisticated HFT trading algorithms, which invariably forces them to pay more for stockwhen buying and to accept less when selling;
Secondly, promising companies that they invest in for long term growth are being subjected to pricesuppression activities that put projects at risk and often results in companies being taken over for afraction of their true worth, and;
Thirdly, investors with funds under management whether it be through superannuation funds orprivate investment capital can find that it is their shares that are sacrificed for short selling practicesthat deliver bumper profits to sophisticated investors in return for severe capital depreciation for themanaged portfolios. Fees for making stock available for lending have in the main been minisculecompared to the destruction of wealth resulting from short selling.
If the system has evolved to allow practices such as the ones described by research to take placeunrestrained, then perhaps Treasury and ASIC need to drop the pretence of fair and transparent marketsand tell it like it is. In which case they should also address compulsory superannuation legislation whereindividuals are forced to participate in a system that now functions more as a Casino than the marketsystem of high integrity that it was originally meant to be.The other option is to cease the ineffective gesturing and grandstanding that constantly takes placethrough the financial media and to constructively address and remedy systemic problems that have placedthe financial markets in jeopardy.
LNC Price at posting:
$1.73 Sentiment: None Disclosure: Held
