Trading Analysis - 29th Aug 2018

Alfacomp

29 August 2018

Volume has been very high - over 7 Million shares changed hands today.

On the surface of it it would appear that shareholders have decided to sell some 3.9M shares today - However I do not believe this to be the case as the fundamentals do not justify such a point of view and generally speaking our shareholder base is sufficiently informed to understand that major news is coming very soon. If shareholders did have such a view why didn't they sell last week - they had plenty of time to after the H1 production updated when the price was above 24p.

This therefore leaves the following possible explanations:

1) A large shareholder wishes to sell, but is so inept that they are doing this in such a way as to beat the price down. Unlikely, and I do not believe that it is Atlas selling their shares in a huff as I have been told that they sold all their shares when their loan was bought off, some months ago.

2) Warrants being pre-sold - previous days have seen significant after hours blocks (750K last Thursday, 600K last Friday, 200K this Tuesday) of shares bought up by MMs, corresponding approximately to the excess quantity of Buys over Sells in the day. Thus there appears to be a share-pot that the MMs can dip into when they need to get the shares they have sold.

3) Shorting based upon the observation of 2) and the almost irresistible combination of a significant Market Capitalisation before financial results have been produced and propagated through the normal sites. The usual trolling preamble was indisputable over the bank holiday weekend.

Pdub pointed out that many of the Sells today are in 50K multiples - these are shown highlighted in green on the chart above. Whilst we have not seen a short of the flash type that was seen on the 18th August last year (shorts like that have since been readily identified) the distribution of 50K multiple sells is clearly concentrated in the 2-3pm period today. Taken together the 50K multiple sells account for 2.45M shares (almost 2/3rds of all shares sold today).

Despite such a large volume of Sells, and the apparent excess of Sells over Buys the effective trading range only fell by 0.5p. The reported closing price of 23.0p is a result purely of the end day auction - this yields the UT (known as 'uncrossing' trade) which on this occasion is unrepresentative and about 0.25p below the Bid-Ask midpoint at the end of trading. I believe that we shall also see delayed Buys of about 500,000 being reported later which would better explain the SP rise after 3.30pm on only a small excess of Buys and which would also be consistent with the post-trading block of 250K still being taken today.

Thus I see an opportunist short of size of 1-2M shares today whilst over the last week or so there may have been something like 1.8M warrants pre-sold into the market. This of course cannot continue indefinitely - there are, after all, only 10M warrants left, and since the spring these have been reducing at a rate of something like 1-2M per week.

Many thanks to NickD, Wul_1976, Rob1967, dryland, Chish and knuttie, all of whom provided information about trades today and Pdub for pointing out the importance of the 50K multiples.


 

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