How do you spot the signs that a shares price is being manipulated upwards before a placing

25th Mar '16 by The Phoenix

10 comments 6862 reads

Hi just wondering if anyone has any warning signs they look for I hold Amersiur resources and this recently went up to 32p in a couple of days before falling back to 26p on announcment of a placing.

I've seen this happend a few times just wondering if anyone more experienced has any pointers to look for can remember Paul Scott touching on it ages back think it might have been with Fitbug.

Any clues to look for appreciated.

Thanks

Andy

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The Phoenix

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10 comments

kevinsamvance

26th Mar '16

The current Beneish M score is -3 which is well below the -1.78 threshold, making AMER safe from manipulation on that score. The Altman Z score, Current Ratio and Quick Ratio also suggests its sound. AMER also has a current lower PSV and PBV than it did back in 2013 & 2014 when it was making profits, that suggests its currently oversold imo.
http://www.stockopedia.com/content/the-beneish-m-score-identifying-earnings-management-and-short-candidates-56823/

gus 1065

26th Mar '16

At risk of stating the obvious, any company not making positive cash flow that needs to invest in its business either to grow or just to survive is an ongoing medium term risk for a placing, especially if there is a history of tapping investors in the past. This is quite a common criticism levelled at AIM, where investors are sometimes perceived as a raidable piggy bank.

You'll sometimes get hints in the press or on BB's but it is not an exact science. Likewise, there can be clues in short term share price movements. If the upcoming placing is to be at a discount, you may see the price drop as prospective investors sell their existing position with a view to taking the placing at a discount (no doubt suitably obscured to avoid accusations of insider trading etc.). Conversely, it can go the other way if the MM's are able to manipulate thinly traded stocks to bid up the price and secure a higher placing price for their issuing client. It's one of those things where it is always easy after the fact to see the likelihood of a placement but pretty difficult to predict ahead of time.

andrewdb

26th Mar '16

I do not have a good answer but can say that Stocko is probably not the correct place to look.

The stockranks are based on a combination of reported earnings, accounting information and momentum over a number of timeframes (there is a page on this site that spells it out). The timeframe of the accounting data points is probably quarterly.
This means that the rankings do not react to sharp changes in sp over days/weeks.

A share I hold has fallen by ~30% in a fortnight ( Tungsten (LON:TUNG) ) because a major shareholder and director made an all-share offer for the business. You might term that manipulation in the same sense that the sudden increase in a sp before a placing is.
As gus said, this is much easier to spot in hindsight.

The other thing I would add is if you are deeply unsettled by this sort of thing, smallcap / AIM stocks may not be for you.

If you want to keep looking I think you want to start looking at the flow of individual trades and the orderbook and at that point I would ask you to tell us if you find out anything useful.

The Phoenix

26th Mar '16

Thanks I get it with blue sky loss makers that say only have enough cash to last for six months or so but Amer was well cashed up and raised more money same thing happened with Telford another decent company which maked the manipulation harder to detect than the basket cases that are desperate to raise cash.

Rusty2

26th Mar '16

I tend to agree I don't think Stockopedia will show these up. Generally I would say a sharp rise in share price without any news is often a selling trigger. There was an article on here about it last year I will see if I can find it. I think Paul is good for this sort of thing but he can't cover every share.

Rusty2

26th Mar '16

Had a quick look at AMER and last year it went from $55m profit to $6m loss, that was June last year, now since then of course the price of oil has fallen even more, so their 55m cash has no doubt gone. The spike in share price could be to do with oil price rising?

I think the (LON:TEF) placement is totally different, that was to raise funds in order to buy new sites in London.

Rusty2

26th Mar '16

Digging a bit more on AMER I found this in Investors Chronicle on 19th Feb 2016: " exploration group Amerisur Resources (AMER) has received approval from Ecuador's government to complete the construction of a pipeline leading to the Platanillo field in Colombia. The pipeline, which should be built by the end of March, is expected to bring down operating costs for Platanillo oil from $27 to $16 per barrel, as well as providing Amerisur with a strategically important asset."

So that is probably why the share price went up? With all your shares do you get email alerts about any news, its really useful to read them before the market opens. I use Investegate which is free, works quite well but there are others.

kevinsamvance

26th Mar '16

Don't forget that the placing was to complete the purchase of Platino's assets so they are snapping up desirable assets while prices are cheap. I can't see anything dodgy about the purchase. They have swapped equity for additional NAV. The placing is not about propping up a rubbish balance sheet or paying for director bonus's. AMER seems to have a very experienced and competent management team.

The Phoenix

26th Mar '16

Thanks all, I hold Amer and agree money was raised to purchase assets at a favourable price but the price was pushed up to 32p a day before crashing back down to placing price of 26p not fussed as in for the longer game as you say hard to detect in some cases its manipulation other times you think does someone know something and is new leaking out, maybe checking volume traded against daily average might help.

gus 1065

26th Mar '16

Good that you're not phased by short term volatility with Amer. It may be in this case that the market simply got wind of upcoming news - not necessarily a placement, but something else that might be good for the share price - and the natural herd instinct bid the price up only to be disappointed by the discounted terms of the placement.

Similar thing with Sirius Minerals (LON:SXX) a couple of weeks ago. Stock price went from 14p to about 22p on the announcement that a project final feasibility study was being published and the expectation that this would include good news on funding. In the event no real news forthcoming and the price fell back down to previous levels.

A bit of a cliche, but classic case of "buy on rumour, sell on news".

Gus

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How do you spot the signs that a shares price is being manipulated upwards before a placing

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The Phoenix

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