Good morning.

Tungsten (LON:TUNG)

Share price: 161p
No. shares: 103.5m
Market Cap: £166.6m

Bear raid - there is not an RNS, but the link to the left is to Matt Earl's blog, where he published yesterday a second critical article about Tungsten. More importantly, data from the FCA re short selling shows that between 11-19 Feb 2015, a substantial number of new short positions were opened (see table below, source: FCA), totalling 5.56% of the company, plus another existing short position of 1.0%.

54ec5022586cdTUNG_shorts.JPG

With 103.5m shares in issue, that means 5.75m Tungsten shares have been dumped on the market by short sellers in the last couple of weeks. Which explains why the share price has been so weak.

UPDATE: a friend in the City has just phoned me to point out that he believes the shorters named above are mainly quant funds (or at least they are firms which contain some quant funds, which he believes are probably the shorters here - i.e. they opened the short positions mainly because the share price had already fallen a lot. Therefore, this opens up the possibility that what we are seeing today could be a large spike down, with those quant funds becoming large buyers of Tungsten shares at some point to cover their shorts. So, if you like the stock, there is the possibility this could be a buying opportunity, who knows?! Although personally my confidence in the business model has been shaken too much for me to consider going back in just yet.

There are two ways of dealing with short sellers. You can either get angry, and demonise them. Or you can engage your brain, and listen to what they've got to say, think about it, and make a rational choice - whether to sell up and watch from the sidelines, or whether to stand in the way of the short sellers, and accept that you might incur short term losses.

Short sellers don't pick companies at random. They select companies which are over-hyped, and where they believe there is something fundamentally wrong with the company. The short sellers are usually (but not always) right too - because they are generally more experienced & sophisticated investors. Loss-making & low turnover companies are often chosen by shorters, as they are very difficult to value, and the valuation is often based on hype & hope, rather…

Unlock the rest of this article with a 14 day trial

Already have an account?
Login here