Zeev, more than anything, it was the FUD (Fear, Uncertainty, and Doubt) factor amongst retail investors that helped sell down the stock, after the downward trend was initiated by BEST and assisted by INCA/ARCA/REDI (the usual MMs used by Castle Creek ... who has 900k warrants to play with, and perhaps a bit more loose shares...).
Your comment that 'some knowledgeable investors' must be selling their shares is not justified from the trading observed on level II, and the unstated implication that there must be something amiss is grossly misplaced.
The primary selling was shorting. Once the stock was taken down to the 20 range, it was simply contained by BEST and INCA et al. The same rascals covered on the ask whenever possible as well.
The question to ask is, why would BEST (Bear Stearns) initiate this as of last Thursday? The potential answer is quite interesting.
As holders of the stock in escrow for the plaintiffs and lawyers in the settlement of the lawsuit, BEST has 950k shares to take care of. The SEC filing indicates they will likely be 'protecting' the 'interests' of the plaintiffs' 600k shares by means of an option 'collar.'
BEST is likely manipulating and holding the stock to a predetermined price, for a brief period of time, in order to price the options they will buy/sell to the plaintiffs to 'protect' their shares until the fall when they are distributed. The assumption is that the plaintiffs would want to buy a put at, say, $22/share, and also offset the cost by writing a call just above the $29.50 shareprice of the time of the settlement. BEST is on the other side of these trades. It is in the interest of BEST to hold the stock well down while the options are priced (outside of the publicly traded options market, so we won't see them), in order to minimize the risk that BEST would have the stock 'put' to them come fall if things didn't work out for VLNC. Conversely, the presumed low ceiling on the calls means that the plaintiffs won't actually get shares when all is said and done. BEST will call them away, say if the stock is $50 in September, since they would own $30 calls on the 600k shares, for example. Sweet deal, eh? Plaintiffs get taken to the cleaners again.
I'd say it's buying time for anyone who missed the last runup.
Monitoring of level II action today indicated there was no 'end of the day' takedown on the stock, as one would have thought possible if someone had a lot more ammunition to spare. Rather, BEST and INCA simply held the stock down at 21'3 for much of the day. Unfortunate or unknowing long shareholders occasionally put up blocks on the ask. Shorts who had coattailed this action were likely buyers. So was I.
We cannot say how long the stock will be held down here, or if continued pressure on margin accounts will induce more selling.
However, Valence shareholders should be aware that the current stock action in no way reflects any change in general market perception of the company's prospects. Those prospects are increasingly brighter. Like mooter, I anticipate the stock being much higher before long. Perhaps in the 30's again in a few weeks, perhaps the 40's by summer... and I still call for 60 by the end of the year.
Hang tight, buy if you can, and for the old-school guys and gals, "smoke 'em if you've got 'em." (OT, I went to a different school!)
Regards! |
