Originally posted by blackdekka:
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Largely a repeat of last night's note: Shorts at July 16 is At March 3 it was 10.4% and the share price was $24, so therefore at least 25% of the shorts are down by 27% or more + the borrow costs. So it's been a crap trade for them. Most of the shorts are US based hedge funds or US $ denominated international shorts. They are looking for US $ returns. The Aus $ has moved from .63 to .66 since March 3. So the loss for the US shorts is on average 33%. That's big. My guess is it is probably closer to 50% of the shorts that are down this amount or more. The 25% is the absolute minimum it can be. In my experience most shorts don't hold their positions more than 3 months: they are looking for a specific event to play out with a timing catalyst in the near term. What are the shorts betting on 1: Iron ore going to $70: Response: clearly not any more; 2: Onslow not working: Response: its working now, but there is some possibility the road may fail again, eg next cyclone season with floods. But you wouldn't hang around now for that, because you take a lot of share price risk up until end of December. You've already lost 30% in 3 months! You'd initiate the short start of January next year. So again doesn't make much sense. 3: Capital raising: Response, very unlikely now; 4: Lithium going to zero, unlikely now. 5: ASIC, AFR stuff; there isn't really anything there. Is ASIC really going to seriously investigate a company returning 39% pa since listing about bad treatment of shareholders (i think not), especially when set against the woke superfunds perennially underperforming the index by about 2% to 3% a year. Last financial year the monkey randomly picking stocks beat the superfunds on average by 3%, and the monkey was actually the best performing fund of the lot with a 13.4% pa return, versus 10% on average for the woke superfunds! 6: $5.4 of debt??? All bonds trading above parity so unlikely any issues there. 7: Further capital cost blowouts; always possible, the Quarterly should provide some guidance there. 8: Valuation: A lot of the Investment Banks have MINs valued at $22 or less (Mac Bank, Jarden, JP Morgan). The models are stale and wrong eg using $90 or less for iron ore, and a lot of other things:But may be the shorts believe these valuation models????? They are pretty dumb if they do! I don't see the shorts argument? If the quarterly does the following things i think about 50% of the shorts would need cover at a fairly big loss (eg 30% plus loss): 1: Current net debt in $5.4 bn to $5.6 bn range, with statement that was the peak, and coming down now by X per month. 2: Onslow production guidance of at least 30 m t pa for this qtr and the year; 3: Onslow FOB cost guidance ideally < $60 per tonne 4: No material new cap ex; 5: Haul rd repair on track for completion by end of August, start of sept, with say 100 km completed by now. 6: No further truck rollover incidents in the interim. If we get those 6 things above, i think we'll get the shorts covering after the quarterly and the share price will re-rate then. The projections for the Fy 26 free cash flow should be reasonably easy to do from the quaterly, and the analysts with the low, out of date and stale valuation models, will upgrade.The problem for the shorts trying to exit after the July quarterly I'm happy to hear the counter or different views?
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