Gross Undervaluation Vs Relentless Selling
Ok, I've got too much of this stock and for a while I've been thinking, "how can this continue to go down when its so undervalued"?
Watching the action (just qualitatively, not with any special technical indicators), I see consistent selling going on for months on end. It really doesn't look like a bear raid (where they "carpet bomb") the stock price to drive the price down. It really looks like someone with a ton of shares is trying to get out at the best possible price.
So, someone big has a bunch and they are trying to get out (for whatever reason). That's my theory. They have millions of shares (17 million volume since 3-Apr when Shafter was announced). So, the price can only stop falling when the selling stops.
So, who is doing this selling and when will it stop?
When will this stop? Well, there's two possibilities that seem most likely:
o Out and out manipulation - where Silver Wheaton is the most likely candidate as they are doing the next financing and suppressing the price should help their silver stream negotiation. If this is the case, the selling should stop when the next financing (a silver stream for a fraction of Shafter) is done. I don't think this is the case, because if SLW was that cut-throat, who would ever consider doing a deal with them again? It jeopardizes their future growth too much. Finally the price action looks like someone is trying to get as much for their shares as possible rather than trying to simply push the price down in one big shove.
o A big owner has decided to get out and is selling their shares (they are a big seller) - for whatever reason. In this case, the selling stops when all the shares are gone.
So, when will the relentless selling end and the stock price turn up?
(a) When the big seller runs out of shares OR
(b) When a new big buyer decides the value is too, too good and takes the rest of the big seller's shares.
I think, technically, (a) looks like the volume completely drying up. When that happens the selling is over and value investors should start nibbling and take the price up.
(b) may look like (a) if the new big buyer is sophisticated. He just puts some shares up at the ask every day and takes whatever he gets. When the big seller is gone (shares dry up), the big buyer may buy some more shares suddenly just to drive the price up and generate some positive momentum. In this case, when the bottom is in, it may be impossible to get any shares near the bottom.
or (b) may look like a spike in the volume with the price going up.
Anybody who would have bought this stock on momentum is long gone and won't be back until there is positive momentum.Anyone who is a true value investor is going to simply hold on (beingas underwater as they are) no matter what until the stock valuationmatches the price. The existing value investors have already had ample opportunityto get all the shares he may desire, so he won't be a source of buyingat this point.
So, we have to wait until the selling dries up. Then the price could start moving nicely as a bottom is put in and new value investors (at first) realize how undervalued this is and then, as the price rises some, momentum investors join in the fun.
Anyone else thinking about where these shares are coming from or what is the source of this drip, drip, drip price decline?
Does anyone else deny that this stock is grossly undervalued? If so, on what basis?
Monty