Monday 23rd October 2017
It is interesting to put the trading activity of yesterday under the spotlight.
After the RNS announcement first thing that the Afritin Demerger was proceeding apace, with the announcement of a new Board of Directors and plans to produce 5000 tonnes of tin concentrate at Uis within the next 5 years, there was strong early buying. By nine o’clock there had been over half a million more buys and negligible sells. Time to put the Bid up you might have thought. All of sudden at 10:12AM what appears to be a sell of half a million shares turns up, and guess what the Ask drops all the way back down from 10.25 to 9.75p.
So what happened ? Evidently Buying slowed up and the MMs did not risk putting up the Bid for fear of being landed with shares that they could not sell on to PIs. But where did the 500K shares at 10:12AM come from – a PI, who having just seen people paying 10.22p suddenly decided that they were prepared to accept 5.5% less than this – I don’t think so. I think more likely another market maker who either had a stock of shares that they paid less than 9.66p for, or who felt that they might be able to buy at less than this later in the day.
There was slight selling until 11AM, when the ask went up a notch, until 11:30AM when share sells of 300K, followed by 250K (though remarkably at 9.75p) occurred (thanks to disclosure by a LTH). Buying opportunities at 9.75p then persisted for about an hour and the nett balance of trades returned to around minus 400K – one or two LTHs were able to increase their positions during this time and then there was little action until the afternoon when buying continued around 9.9p.
Unless you think an RNS or trading update is so remarkably simple to understand don’t assume that the rest of the market will get it as quickly as you do. They are not yet on the same page and have little understanding of the fundamental strengths that the company possesses. So don’t feel the need to rush in to buy immediately on positive news. Admittedly there was a 30 minute delay before much happened on Monday but if you jump early you can be fairly confident that the MMs will take the opportunity to charge top dollar.
Equally if the apparent SP rises and then falls on an RNS announcement do not immediately rush to judgements like “the market doesn’t like the news” or “what happened to our momentum” – firstly there are very simply tricks that can be played with the advertised Bid and Ask to make it appear that the mid-point SP has risen, and then fallen, and secondly the ‘market’ overstates the capabilities of the small shell of investors that surround our hard core of Long Term Holders – for it is they who may chose to jump hither or thither on news such as this and who dominate the short term price movements.
Think runaround with Mike Read – is it really the judgements of those that change their minds that you really want to be following ?
Over time, as news penetrates the wider market and the shell of investors that know anything about BMN grows, more appropriate SP value will be obtained.