Shorts Are Not To Blame For This........
If this stock was a screaming buy yesterday, last week, last month, etc., then institutional investors, small cap fund managers, and wealthy individuals would be piling into this stock and shorts would be nailed…...But the "big boys" seem to have avoided touching this name all along to date...........perhaps longs should ask themselves why that is and if those on the sidelines may have noticed / realized something the current longs have missed…..?
Shorting a stock is far riskier than going long, so, other factors being equal, shorts have more on the line than longs......
Shorts are an important part of the market as they act as a counterweight to bulls.....Shorts got Valeant right, Concordia right, Home Capital Group, right, etc. and the longs who heeded their advice early and sold at a small loss owe the shorts a debt of gratitude for saving them from far bigger losses than would likely have occurred if shorts hadn't sounded the alarm on these names when they did and investors were led to the slaughter by the pumpers with no counter-arguments from those with their own money on the line in shorting the stock.....Also, don’t say Valeant, Concordia, etc. were obvious shorts…..Valeant spent some time as the largest stock by market cap in all of Canada, and Concordia once traded at over $100 per share, so there were an awful lot of supposedly very smart people who got nailed on these names by going long…….
Further, Canadian exchanges are not the only ones that allow shorting, so blaming the Canadian exchanges for the descent of this or any other company is silly - As stated above, shorting is a valuable component of stock market activity: Shorts get squeezed / suffer if they are wrong, and longs are just as likely to make claims pumping their positions that turn out to be incorrect or even dishonest – it’s a two way street……
Bottom line: If you think the company is even more undervalued right now, then by all means put more money into it - If the shorts are dead wrong you will be rewarded…..
Conversely, if you think the shorts may be on to something or big money investors may be cautious on this name for good reason, then consider doing some more thinking / investigation on this name and maybe reconsider your position - You have the freedom to choose what to do with your money, same as the shorts........
Finally, with regard to the apparent promises made by management that they will close tens of millions of dollars’ worth of deals / acquisitions by year end:
If a company over-promises and under-delivers, they will cause further damage to their credibility. In my view, good management does the exact opposite: Under-promise and over-deliver.
The fact that these deals haven’t closed yet exacerbates the problem. If you were on the other side of the negotiation and heard that CRH management had promised their shareholders that they would deliver $X in acquisitions by year end, you would likely look for better terms on any agreement before it closes than might otherwise be the case. Now, CRH management appears to have painted themselves in a corner: If they don’t close these deals by year end, they will take a blow to their credibility, investors will be disappointed, and those on the sidelines will likely be even less inclined to invest. Alternatively, if CRH management insists on closing deals come hell or high water, they have just handed those on the other side of the negotiating table more leverage in extracting better terms on any deal before it closes. Promising the closing of deals before they are actually closed was a big mistake in my view.
Secondly, I doubt the big money players will be impressed by acquisitions alone. I suspect they will want to examine the terms of any deal to see what value the company is receiving for the outlay of money / other assets / partial ownership of the business that CRH is giving the sellers….There is a long list of companies that have overpaid for assets (any asset can be overpriced if the compensation paid is high enough) so the details of any deal matter, and I suspect the smart money will want time to mull over any acquisitions before they decide whether or not to hop aboard…..