theories on tex: a week in review.

It's been an interesting week watching this stock, and trying to read into the higher volumes and sell down. We could look at this due to potentially disgruntled holders frustrated at the ongoing delays, a lack of confidence in the upcoming wells, or even a sell down to finance the upcoming 5c options. However I think there is more to this than these factors.

Looking at the trading patterns, it was consistent with someone selling down volume, that habit of leaving 500 shares on the buy side showed that there was more depth behind the sell and they were patient in trying to maintain the price. Most of the holders with 1m+ shares are connected in some way so we start to look at insiders.

Now we move to the fact that TEX is in need of cash for the April drilling and the directors and significant shareholders have been supportive in the early conversion of options. Looking at Northern Star announcement last November (http://www.asx.com.au/asxpdf/20110824/pdf/420lkxthpsx584.pdf) and you'll see the same names and players involved. It seems to be the same game plan so the question comes is this the Directors or Investmet selling down to fund the early exercise?

Looking to the recent Appendix 3B announcement on the 9th March, in particular the exercise of the 16,880,417 7c options, you could conclude that Investmet has exercised their 7c options. Now as a significant shareholder, this would fall within the 1% rule under s 671B of the Corporations Act and they would have been obligated to report that change within 2 business days. That hasn't occured, however looking at their previous significant shareholder annoucements, they have been consistently late so I wouldn't discount based on that reason. Assuming Investmet is converting options, we assume the other Directors are doing likewise. Hence the increased liklihood of selling down to fund this process per the Nothern Star model

Volume over the last 48 hrs in TEX has slowed once it has dropped under 10c, which would be consistent with it not being financially sound to sell under the 10c conversion price. I can't explain the 500,000 at 9.5c though, other than it must be someone with cheaper options still to convert.

Now this theory is all circumstantial, it could simply be one of the simple reasons in my first paragraph. We'll find out in 14 days when directors have to report to market about changes in their interests if I'm right or wrong. It's always fun to speculate regardless.