TLG Chart, page-3040

Hi Gvan

On HC I find much so discussion of shorts and so many misconceptions associated with them.

PLS is the most shorted company on the ASX and I have followed it in detail for along time.

Three of the heaviest shorters, State street, J P Morgan and Blackrock have in the last year or so have become "substantial shareholders" with holding over 5%. This is in a market that over that period moved up, down, up, down, up and currently moving down. There is little doubt that they all contributed to these fluctuation and took advantage of them to accumulate. Force the price downward by selling at the 10am opening for 4 days in a row and then re-enter by buying low which as a consequence forces the price to rebound a bit (38% of the drop is not uncommon).

Becoming a substantial holder or significantly changing that holding from 5% to 7% requires a disclosure announce, The announcement are required by the ASX to provide detailed a record of their trading. There are pages of then in these details in the announcement.

I decided to wade into them with a detailed look. Astonishing to say the least.

With one State street disclosure I found multiple examples of this behaviour.
Borrowed 3.5m shares from Goldman Sachs and minutes later loaned out 3.5m shares to an undisclosed third party. Obviously they had an order in for 3.5m shares and the borrower was prepared to pay at their rate of monthly interest for the shares they borrowed, State Street obviously borrowed the shares from Goldman Sachs at a lower rate of monthly interest. They make money until the shares are returned and as soon as that happens they return them to Goldman Sachs. It's money for jam.

However in the "Shortman graphs" two sets of 3.5m are added. So a further 7m shares are shorted. So we have a case of double counting. They are only removed from Shortmans graph when they are returned. If that third party loans them out again at a higher interest rate than he is paying we have a case of triple counting. So things are not what they seem.

If you see a share in constant decline with shorters active, the shorters would be fools not to buy some shares on the way down. The misconception that so many people here on HC make is the belief that they then return them to the lender of their borrowed shares. If they are prepared to pay the interest rate why return them? So when the SP bounces enough, they have a ready pool of shares to sell to again force the SP down. They don't have to go to the loaners to borrow another lot of shares.

With TLG in the last 2 years we have seen two fluctuation from $2 to $1 range and then back up to $2 and is currently down to $1. It's money for jam.

I think that some of the shorters are slowly accumulating shares with each fluctuation to be like State Street and accumulate a long holding for when the tide finally changes.

Under the terms of lending out the shares the lender has the right to at anytime give notice for the shares to be returned. The borrower knows this and would be and idiot is he didn't have a pool of shares ready to at least reduce the need to enter the market to buy, I suspect that the experience shorter with TLG under the market conditions we have seen over the last two years would easily return the shares without entering the market to buy.

Yes the Johnny come lately's or the fools can get squeezed. It's the risk they take.

So in summary Shortmans graph does not reflect the number who could be forced to enter the market to buy shares to be returned, It only reflects the shares borrowed and not returned as yet. It takes no account of the shares the borrower has in his pocket.

just my opinion, as always DYOR.

cheers Lies.