Disclosure: The author has a short position in one or more of the shares mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Afren PLC Sell above 2p and Bank the Cash by the end of August

By Lucian Miers

26 June 2015 00:59

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As I write shares in Afren (AFR) trade above 2p and there is plenty of borrow. These gifts do not come around often and the stock should be sold before it subsides. 2p is at the very least twice what the company is worth.

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Comments

drunken sailor

26 June 2015, 07:28

“Either way it’s a must do short”

Lucian,

There is a lot of desperation and delusion out there in PI land and whilst I agree the fundamental case for shorting is incontrovertible, the ground is extremely fertile at the moment for further pump and dumps on all sorts of “rumours”. Thus anyone shorting needs to be careful where they set any stop loss and needs to be prepared to meet any margin call.

Could you explain the effect on a short taken now and remaining open through the ex rights date.

In normal situations there is a TERP that can be calculated, although this is extremely theoretical at the best of times. The company did imply a TERP when it said what the discount to TERP of the 1p price was. However I do not see how a sensible TERP could possibly be calculated with the much larger dilutive effect of all the other aspects of the recap, plus the massive unknown regarding what take up will be like of the OO, which is not underwritten.

I would welcome an explanation of how the difference in cum and ex would be treated on a short on Afren.