For now, no less than, the issue will stay something of the mystery.
We are talking about the still high short-interest position in Enbridge, a few weeks after it closed a $2.3-billion equity offering with time of substantial stock price gains.
According to information released Friday using the TMX, rapid position in Enbridge as of March 15 stood at 43.396 million shares. As of this level, rapid position was 4.395 million shares below what it would be a student in ignore February.
On that date (Feb. 29) rapid position stood at 47.792 million shares, a sum which was 10.598 million shares higher than the mid-February 2016 level. Accordingly within the period, mid-February to mid-March rapid position expires by 6.203 million shares. Over that four-week period the shares are up by almost $5 – or more than 10 %.
The expectation might be that the short position might have declined substantially within the first reporting duration of March because Enbridge closed its equity offering on March 1.
That expectation scaled like what some market participants referred to as “massive short covering” within the wake within the large equity financing combined with the subsequent stock price gain: there are better places being than needing to cover a brief position once the stock is moving higher. “Raising capital tend to get rid of some shorts,” said one fund manager during those times.
Related
- A short story about Enbridge’s financing, having a twistBanks take maximum quantity of Enbridge stock, boosting financing to $2.3 billion
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In that offering, that was announced Feb. 24, Enbridge sold 56.511 million shares at $40.70 a share. Individuals who received an allocation did well since shares were trading at $43.16. The stock closed Friday at $49.67, meaning it’s gained more than Twenty percent inside the issue price. Some analysts have attributed the present rally inside the stock price for the begin the oil price.
The talk in those days might be the short position acquired because of the consensus view that Enbridge will have to raise equity at some stage (given its capital expenditure needs) the intend to sell the stock short and purchase it back later for less money would repay.
And and so the argument rang, selection spot to cover rapid position than from an allocation in the new issue – which investors knew might be costing a discount towards the value.
Perhaps, but one hedge fund manager said that “the fills” provided to his ilk are often under adequate when the underwriter knows the firm is brief the stock. For the reason that situation the fund must industry to buy shares to pay for their short position.
But instead of falling, rapid position build-up continued after Enbridge announced its equity offering. At that time the feeling was that it was due to one-day distinction between when the TMX reports rapid position (Feb. 29) so when Enbridge closed its financing (March 1.)
“Wait as much as the next reporting period, it’ll all come clear,” noted one market participant when reacting to the 10.598 million short position increase in the best two weeks of February.
Well, the next reporting period is here and also the short position remains large. Meaning we’ll look with fascination with the following short position that’s published at month end.
Financial Post
bcritchley@nationalpost.com
