OXR oxiana limited

OXR - Buying Strategy

  1. 10,564 Posts.
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    Commiserations to all those getting screwed in OXR this morning...might be more to come I'm afraid.

    Some time back I suggested I would do some research into the effects of dividend reinvestment plans, especially linked to discounts and then I extended it into conversions as well along with rights issues etc.

    The whole project has become bigger than Ben Hur but the games that got played in GTP really focused my interest (understandably..)

    Naturally there isn't a 'one answer fits all' result for each of these scenarios but what I do have is some interesting stats.

    Surfice to say that in the case that a small to medium stock is converting in the money options with an underwriter picking up the balance, the share price in an overwhelming percentage of instances will return to the conversion price of the issue - especially if a substantial percentage of stock is involved.

    So - and this is purely my opinion of course - one should be exceedingly careful of buying OXR stock over the next two months on the inevitable price surges caused by good news stories used to keep the share price of OXR above the conversion price;

    a/ because it will almost certainly fall again back towards 25c in the short term and,

    b/ because you will almost certainly be able to buy fp's at around 25c over the next couple of months if you want to enter for the long haul imo.

    The reason for this is pretty straight forward. If you are paying any premium today to buy the oppies with the likelihood of converting you should remember that the underwriter will be getting an amount (who knows how much) of the stock with no premium at 25c PLUS their underwriting fee as a bonus. The price for OXR could by then be trading at a premium but, being a market, will almost certainly drift back to that issue price on the expectation of the underwriter trying to place the stock....

    Remember, this is all only my opinion and not advise and you should do your own research as always.

    Cheers,
 
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Currently unlisted public company.

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