On large holdings, New World Oil and Gas, disorder and the Takeover Panel

Comments

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   DUCK AND DIVE

   8 May 2015, 05:39

   Excellent appraisal, Nigel. I don’t buy the theory that a lot of little guys are getting hurt by this débacle — in fact, I would assume the little guys have been making hay this week and can hardly believe their luck. If there are any passive participants whose brokers have landed them in the mire without their prior knowledge then I think that number must be very small – and if they can afford to leave a £50k discretionary float with their broker then they probably aren’t the “little guys” anyway.

   And where are they? Why haven’t they chimed in here or on the forums to express their outrage at being stiffed by their broker?

   No, these “little guys” are a myth in my opinion — and those who may be getting hurt by the short squeeze probably knew exactly the game they were playing, and the risks. Given the large volume of shorts traded, it looks like an orchestrated shorting campaign co-ordinated by the issuing broker and the flippers who signed up for the placing.

   The good news surely is that the execrable Fatty Cornish cannot possibly continue to be an approved NOMAD. In fact, I would be surprised if he were not right now contemplating the best and quickest way to declare himself bankrupt so as to avoid litigation. Hopefully, the regulators will be next in the firing line.

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   J P Spaghetti

   8 May 2015, 06:12

   I’ve a conspiracy theory for you all based on the difficulty I have in believing Beaumont Cornish genuinely made such a fundamental mistake as to believe the placing was inevitable:

   Supposing there wasn’t actually any forward selling, or – at least – that this constituted only a small fraction of the huge activity in the days following the placement announcement. Perhaps this activity was down to multiple trades with a complicit MM. And perhaps this ostensible oversight was merely part of a ruse to convince the wider market that forward selling had indeed resulted in naked short positions being opened, positions that would inevitably result in a short squeeze. This ruse alone would surely have inevitably led to a price hike based simply on shares being bought by those convinced the SP could head in only one direction. In other words, the assertion that a huge price increase was on its way was destined to become a self-fulfilling prophecy but not because of a short squeeze. Simply because of buying pressure by those speculating on the arrival of one.

   Of course the net effect would largely be the same, but those who partook of the placing – far from being screwed – would be laughing all the way to the bank.

   Sorry if that’s off its head, but credibility was lent to it, I think, by my being able to buy at just over 0.22p this morning. If naked shorters were clamouring for them, why was I able to do so after the LSE announcement that it’s going to be business as usual? I went on to sell far too early before I left for work, by the way, so perhaps my reasoning has just become mangled due to festering anger at having been premature in so doing.

3. ---

   Yuff

   8 May 2015, 07:08

   Sorry should read

   Nigel, what do you see happening?

   Bloody iPad :-(

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   Czech Mate (aka Janos)

   8 May 2015, 07:28

   Great piece but you say “Right now, anyone caught in a naked short cannot bail out by selling because they have nothing to sell due to non-delivery.”

   They get out of their position by buying, not selling? They can buy and hope that it settles in time to enable them to settle their prior sale trade.

5. ---

   nigel somerville

   8 May 2015, 08:51

   Janos – guilty as charged! Long night….try ‘can’t bail out all that easily by buying because the stock may still not be delivered’

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   tex

   8 May 2015, 16:03

   Great comments and summary, Nigel.
   You are both fair and a gentlemanly in
   this whole saga that is New World
   Disorder. I don’t know if those guys
   are crafty or lucky, but I know they
   are running in place as fast as they
   can! The Wednesday article – you
   have come the closest to figuring
   it all out; if anybody else can do
   better, tounge in cheek, or not,
   let’em try!

   Best wishes,
   Tex

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   J P Spaghetti

   8 May 2015, 19:02

   This whole mess reminds me of an old mucker of mine who ran up a five figure overdraft with the bank whilst training to become a barrister at Gray’s just around the corner from you guys (think he went on to fail his exams) who used to say that if you owe the bank a few hundred or even thousand pounds it’s your problem (he still owes me a tenner). If you owe them tens of thousands of pounds, however, it’s their problem (this was many years ago – pre-meltdown).

   In a similar vein, if what has been speculated is indeed true, the situation in which forward sellers have found themselves is so bad it seems to me it might intrinsically slam the breaks on and prevent any further SP rises. For instance, if 1 billion shares were already in issue and the same number was proposed in the placing and the placing is not going to happen then the shorters may well be motivated to continue to chase them. But if multiples of the number of shares in issue have been forward sold, they may be tempted to just think “sod it” and run away to live in a commune or a Buddhist (or should that be buddhist – modesty and all that?) retreat in Scotland. If they do, what can be done? If they don’t buy (and holders don’t sell) there’ll be no further rises.

   I suppose what might shoot that scenario in the foot is the forward sellers themselves not knowing how many shares in total were actually forward sold.

   Oh, and yes – great article.