The Short Report – 19 Oct 2023

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    [0] => Array
        (
            [0] => ((BOQ))
            [1] => ((LTR))
        )

    [1] => Array
        (
            [0] => BOQ
            [1] => LTR
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)

This story features BANK OF QUEENSLAND LIMITED, and other companies.
For more info SHARE ANALYSIS: BOQ
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

See Guide further below (for readers with full access).

Summary:

By Greg Peel

Week Ending October 12, 2023.

Last week the ASX200 staged a Wall Street-led recovery before it all came a cropper again this week.

As the table below indicates, movements in short positions were mixed last week. There was only one movement of one percentage point or more. Bank of Queensland ((BOQ)) shorts rose to 8.6% from 7.6%.

The bank reported last week and its shares fell -7.4% on the day. Before today, they had clawed back half that loss, but the shorters only took this as an opportunity to sell more. Among stockbrokers covering the regional lender, Sell ratings (or equivalents) are quite popular too.

The Liontown Resources ((LTR)) saga continued last week, with shorts rising to 10.2% from 9.3%. This week has brought a new development. See below.

Weekly short positions as a percentage of market cap:

10%+
PLS     14.0
GMD   10.9
SYR    10.7
LTR     10.2

In: LTR

9.0-9.9%

CXO, FLT, IEL

Out: LTR        

8.0-8.9%

BOQ, APX, SYA, MSB

In: BOQ, MSB

7.0-7.9%

SHV, ACL, LLC

In: LLC           Out: OBL, TIE

6.0-6.9%

OBL, ARU, IFL, TIE, WBT, DMP, HVN

In: OBL, TIE, DMP                Out: BRN, JBH, ELD

5.0-5.9%

BRN, ELD, JBH, TPW, LIC, SLX, LYC, AGY, A2M, CHN, ARB, VUL, INR

In: BRN, ELD, JBH               Out: DMP, VUL, INR

Movers & Shakers

Two weeks ago Liontown Resources issued an update on expected capital and operational expenditure for its Kathleen Valley project that exceeded analysts' forecasts. This led to speculation the non-binding takeover offer from Albemarle at $3.00 may be threatened.

Ahead of the offer, the shares were trading at $1.52.

To complicate matters, post-offer Gina Rinehart’s Hancock Prospecting had been building a stake that had closed in on 19.90% (the threshold at which the buyer must state their intentions), all at prices below Albemarle’s offer.

It was thus not a great surprise when this week Albemarle walked away, leading analysts to assume a capital raising would be required to fund Kathleen Valley. Liontown went into, and currently remains in, a trading halt.

Last night Liontown approached fund managers, the AFR reports, seeking to raise $400m in equity alongside $760m in debt. Shares were being offered at $2.20-2.60ps – significantly below the initial Albemarle offer but still well above the trading price pre-offer.

Ahead of the offer being pulled, the shares were trading at $2.99. They fell to $2.79 before trading was halted. It looks like the shorters (10.2%) are going to clean up on this one when trading recommences.

ASX20 Short Positions (%)

To see the full Short Report, please go to this link

Guide:

The Short Report draws upon data provided by the Australian Securities & Investment Commission (ASIC) to highlight significant weekly moves in short positions registered on stocks listed on the Australian Securities Exchange (ASX). Short positions in exchange-traded funds (ETF) and non-ordinary shares are not included. Short positions below 5% are not included in the table below but may be noted in the accompanying text if deemed significant.

Please take note of the Important Information provided at the end of this report. Percentage amounts in this report refer to percentage of ordinary shares on issue.

Stock codes highlighted in green have seen their short positions reduce in the week by an amount sufficient to move them into a lower percentage bracket. Stocks highlighted in red have seen their short positions increase in the week by an amount sufficient to move them into a higher percentage bracket. Moves in excess of one percentage point or more are discussed in the Movers & Shakers report below.

IMPORTANT INFORMATION ABOUT THIS REPORT

The above information is sourced from daily reports published by the Australian Investment & Securities Commission (ASIC) and is provided by FNArena unqualified as a service to subscribers. FNArena would like to make it very clear that immediate assumptions cannot be drawn from the numbers alone.

It is wrong to assume that short percentages published by ASIC simply imply negative market positions held by fund managers or others looking to profit from a fall in respective share prices. While all or part of certain short percentages may indeed imply such, there are also a myriad of other reasons why a short position might be held which does not render that position “naked” given offsetting positions held elsewhere. Whatever balance of percentages truly is a “short” position would suggest there are negative views on a stock held by some in the market and also would suggest that were the news flow on that stock to turn suddenly positive, “short covering” may spark a short, sharp rally in that share price. However short positions held as an offset against another position may prove merely benign.

Often large short positions can be attributable to a listed hybrid security on the same stock where traders look to “strip out” the option value of the hybrid with offsetting listed option and stock positions. Short positions may form part of a short stock portfolio offsetting a long share price index (SPI) futures portfolio – a popular trade which seeks to exploit windows of opportunity when the SPI price trades at an overextended discount to fair value. Short positions may be held as a hedge by a broking house providing dividend reinvestment plan (DRP) underwriting services or other similar services. Short positions will occasionally need to be adopted by market makers in listed equity exchange traded fund products (EFT). All of the above are just some of the reasons why a short position may be held in a stock but can be considered benign in share price direction terms due to offsets.

Market makers in stock and stock index options will also hedge their portfolios using short positions where necessary. These delta hedges often form the other side of a client's long stock-long put option protection trade, or perhaps long stock-short call option (“buy-write”) position. In a clear example of how published short percentages can be misleading, an options market maker may hold a short position below the implied delta hedge level and that actually implies a “long” position in that stock.

Another popular trading strategy is that of “pairs trading” in which one stock is held short against a long position in another stock. Such positions look to exploit perceived imbalances in the valuations of two stocks and imply a “net neutral” market position.

Aside from all the above reasons as to why it would be a potential misconception to draw simply conclusions on short percentages, there are even wider issues to consider. ASIC itself will admit that short position data is not an exact science given the onus on market participants to declare to their broker when positions truly are “short”. Without any suggestion of deceit, there are always participants who are ignorant of the regulations. Discrepancies can also arise when short positions are held by a large investment banking operation offering multiple stock market services as well as proprietary trading activities. Such activity can introduce the possibility of either non-counting or double-counting when custodians are involved and beneficial ownership issues become unclear.

Finally, a simple fact is that the Australian Securities Exchange also keeps its own register of short positions. The figures provided by ASIC and by the ASX at any point do not necessarily correlate.

FNArena has offered this qualified explanation of the vagaries of short stock positions as a warning to subscribers not to jump to any conclusions or to make investment decisions based solely on these unqualified numbers. FNArena strongly suggests investors seek advice from their stock broker or financial adviser before acting upon any of the information provided herein.

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