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18th Aug 2017 Flash Short – Analysis

The context for the 18th Aug attempted flash short is described in a separate article which you may wish to read before getting stuck into the forensic detail here.

An annotated listing of the share trading log for Friday is shown below (you may wish to right click the trade logs and ‘open in a new tab’ for reference during the discussion.)

Of course these were subsequently augmented after hours by the trades shown below. These are reported not with the actual Bid-Ask values at the time of the transaction but the Bid-Ask at the end of trading. Not a problem – it is fairly simple to simply reinsert these trades into the ones above and derive the correct Bid-Ask values from the surrounding trades. At least the LSE system gives you these trades with their proper times so you can work out if they are buys or sells, alas ADVFN simply reports these with the time that they actually get published (not helpful).

 

Once all the trades have been merged together, and the correct Bid-Ask settings established by interpolation we get the following behaviour from 3.10pm to the end of the day. The Bid (red) and Ask (orange) limits are shown and the actual trade prices are shown in blue. The 14 trades marked on the listings and timeline are all sells and are all in multiples of 50K shares – I contend that this rapidly repeated selling constitutes a coherent trading pattern designed to drive the share price down.

If we go through the trades in order we first find two closely spaced 50K sells (A & B) – possibly to test if the SP moves under selling – evidently it does and these are followed 6 minutes later by a more aggressive 100K sell at 15:29:10 (C).

Interestingly trade C was reported late – not 1 hour late as is often the case, but 76 seconds late (remember ADVFN shows the reporting date – on that system trade C has the same time as the previous trade of 5,146 shares) – this delay means that it was not reported until the Bid-Ask had been changed – thus it was reported with a Bid-Ask of 8.75-9.25. The Bid-Ask reported at the time of both the earlier trade at 15:23:05 and the later one at 15:30:09, seemingly reported without delay, were apparently both 9.0-9.25 – yet trade C happens at a price of 8.75p. It would seem that the Market Makers took trade C as a clear sign to drop the Bid – which they did and then reported the trade after a 76s delay which made it appear consistent with those new settings.

Trade C was followed by another 100K trade, this time at exactly mid-price (D) – in principle one might view this as a buy, but the rapidity of such 100K trades makes it seem unlikely, especially as trade D was followed in quick succession by 50K sell (E) and 100K sell (F) which led the Bid to drop by 0.25p again. Evidently the Market Makers decided that something strange might be happening as they doubled the Bid-Ask spread to 0.5p at this point.

These were followed again in rapid succession by two more 50K trades (G and H) which led the Bid to drop another 0.25p (a total of 0.75p, or more than 8% of the SP, in less than 7 minutes). Followed by another 100K sell (I), a very large sell of 350K shares (J) and then another 100K shares a few minutes later (K). Note that up to this point it would seem that there was negligible buying apart from potentially the 100K trade at 15:38:19 (the peak between H and I). This 100K trade has been classed as a buy, based upon the price paid, and has not been included in the share selling pattern analysed here.

Evidently buying became more generally possible after trade K – as this was followed about 40 seconds later by a small buy at 8.50p.  This trade, and this trade alone, was reported with a Bid-Ask as low as 8.0-8.5 – one is forced to ask why did these go even lower after trade K ? Are there more delayed trades to be reported ? If so they must be sells to have such an effect on the Bid and Ask, and would also be entirely consistent with this coherent selling pattern.

Buying after 15:44 picked up considerably, and within only 2 minutes the Bid-Ask had recovered to 8.5-8.75. A further suspicious sell of 100K occurred at 15:46:04 but this did not suppress the Bid. Buying increased rapidly and the Ask moved back up to 9p , where it stayed until the end of trading. Many of the trades immediately after L are represented as sells in the LSE share trades listing as they were all below the Bid-Ask mid-point, but consultation with more than 15 PIs on the LSE board has established that all of the trades between L and M can be considered as buys by PIs.

Further 100K sells were made at point M and N but due to the high volume of buying these had absolutely no effect on Bid-Ask settings. The last trade of the day happened at 8.99p, down some 4.2% on the previous day’s closing price of 9.38p.

Cumulative Trade Analysis

Adding up the 14 trades already described gives a total number of shares sold as 1.4Million with a value of GBP 119,520. This works out at an average sale price of 8.54p per share – thus if these were sold as part of a shorting attempt purchase prices significantly below 8.5p would need to be obtained when buying the shares to close the short for it to not lose money.

Following reporting by  PIs who are regular posters on the LSE bulletin board a detailed analysis of all the trades after 3pm was conducted in order to further distinguish genuine buys from sells. From the identified start of the selling pattern (15:21:37) the cumulative behaviour of the Suspicious Sells, Genuine Sells and Genuine Buys can be calculated and is shown below, together with the Nett shares traded (Buys minus both sorts of Sells).

From this one can see a number of things:-

  1. The number of genuine sells sparked by the suspicious sells is minimal – 140,031 vs 1.4 Million – for every share sold by an existing shareholder it takes 10 shares to be dumped onto the market. It would appear that almost no significant Stop-Loss instructions were triggered by this flash short.
  2. The total nett selling of shares reached a maximum of very close to 1 Million – at 15:42 the Market Makers were holding 1 Million shares.
  3. 10 minutes later these had ALL been hoovered up by hungry investors.
  4. The buying continued, resulting in more than 1.74 Million shares being purchased after the start of the short selling pattern – significantly in excess of the 1.4 Million sold.

Conclusion

The 18th Aug rapidly repeating selling pattern has been analysed in detail and is entirely consistent with a co-ordinated shorting attempt. This type of behaviour has been seen before in BMN trading, specifically on the 11th and 12th of May 2017.

The 1.4 Million shares sold as part of this pattern were absorbed rapidly by private investors – in no more than 10 minutes they purchased all the dropped shares and continued to outstrip the selling of any further shares into the market. Bear in mind that this was at 4 o’clock in the afternoon on a summer friday – many people would have been on holiday, or heading home for the weekend.

The choice of timing does not seem accidental. The shorters chose a time when they thought that they could maximally suppress the share price so as to allow some Stop-Loss instructions to be triggered to allow them to buy the shorted shares back at a price lower than they gave them away for. This did not happen and BMN PIs were sufficiently on the ball to hoover up all the shares that the shorters were throwing at them.

Why then did the share price not return to its original level ? – Why because those that are selling short still have to purchase the 1.4M shares that they have sold – now that investors are aware of this fact there is little chance that they will be parting with any of their shares any time soon. Thus the necessary purchase of the shares needed to close the shorts will inevitably drive the SP higher and probably somewhat above the 9.25p level at which point the flash short was started.

Are the shorters assuming that they will be able to obtain shares from warrant holders ? If they are then there are only a limited number of warrant holders that they may be able to use for such a purpose – basically either Darwin or Wogen and the latter may we have exercised their warrants last week. Only the 3M Darwin warrants at 8p would appear to offer anybody short of 1.4M shares a possible way out  – if they cannot use those then there will inevitably be a short squeeze which will  drive the SP higher still.

Final Conclusion

Bushveld Private Investors are already sufficiently well informed and experienced to be able to see off the crude attempts at trolling and disruption of the LSE bulletin board that we have experienced since March this year. Following Friday’s trade action it is now clear that they are also sufficiently on the ball and well funded enough to be able to see off direct shorting attacks such as that attempted on Friday.

From this it should be clear that nobody owning this stock should set a Stop-Less instruction anywhere near the current share price. To do so would simply be an invitation to be mugged.

Will the shorters be back – will they be like the gambler who cannot leave the roulette wheel and who continues to double their stake until they are completely bankrupt ? We shall see, but if they do return then they are clearly more irrational than we are, now that the facts are published here for all to see.

Acknowledgements

I should like to thank all the following posters on the LSE bulletin board for their timely confirmation of Friday trade details which made analysis a great deal easier. In alphabetical order: A12DYX,  A.K.A.Muppet,  Banjowest,  Fatbanker,  glh49,  Knuttie,  LiveLifeLove,  pb940,  Pdub,  Rodakos,  Sanchez599,  SOTRR,  SquirtyFlower and swampdub.

This article only conveys the personal opinion of the author. Whilst every effort is made to ensure the content is accurate, we cannot guarantee the accuracy of the data shown. This article does not constitute professional, financial or investment advice and must not be used as a basis for making investment decisions.

Site content is not authorised by the FCA and you are not safeguarded by the Investor Protection measures of the Financial Services and Markets Act 2000. See our full disclaimer

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Thank you for visiting the Bushveld Perspective, an archive of opinions from many private investors and commentators on the subject of Bushveld Minerals, which it is completely independent from.

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The content only conveys the personal opinions of our contributors. Whilst every effort is made to ensure the content is accurate, we cannot guarantee the accuracy of the data shown. Site content is not authorised by the FCA and you are not safeguarded by the Investor Protection measures of the Financial Services and Markets Act 2000.

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This article only conveys the personal opinion of the author. Whilst every effort is made to ensure the content is accurate, we cannot guarantee the accuracy of the data shown. This article does not constitute professional, financial or investment advice and must not be used as a basis for making investment decisions.

Site content is not authorised by the FCA and you are not safeguarded by the Investor Protection measures of the Financial Services and Markets Act 2000. See our full disclaimer