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Amazing to see this activity!  What is your speculation:

1. some weird options expiry thing

2. Distressed seller made a deal to sell stock at a predetermined price that would be transacted today through the NYSE

3. More misguided short selling attack, either to shake loose some weak hands to cover older positions.

 

Frankly, I'm partial to #2 -- and the buyer may even be ORH!  It could also explain the slow runnup this past 2 weeks, as the price may have been set at 5% below the average trading price the past X days (10-20 days). 

 

Again, this is all my speculation -- but I'm not concerned over this strange trading activity.  If it persists for any reason I"m sure ORH will start utilizing their remaining $150M in the NCB to sop up this mess.

 

cheers,

Vinay

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Guest kawikaho

Weird, the trading behavior is like what I saw with ATSG today.  Lots of price movement, huge abnormal volume, and a huge dump of shares near the close.

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I'm still interested in this massive volume on Friday June 26th.  The last time the volume was close to this occurred on Sept. 3rd, 2008.  On that day, ORH issued a press release that they are extending their Normal Course Issuer Bid by an additional $200M.

 

http://phx.corporate-ir.net/phoenix.zhtml?c=129394&p=irol-newsArticle&t=Regular&id=1193331&

 

  Their Q3 report showed they purchased back 3.8M shares during Q3.  So, my speculation continues to be that ORH bought back a huge chunk through some private transaction that closed at the end of the Q2.

 

"During the quarter ended September 30, 2008, the Company repurchased and retired approximately 3.8 million shares of  its common stock for $140.7 million, representing an average repurchase price of $37.34 per share. From the inception of the repurchase program in June 2007 through September 30, 2008, the Company has repurchased and retired 12.1 million shares of its common stock at an aggregate cost of $445.8 million, representing an average repurchase price of $36.79 per share;"

 

cheers,

Vinayd

 

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Hi lcf,

 

I'm not sure what you mean.  Could you elaborate or direct me to a link on the board that discusses this Russell rebalancing, or news release (...or FFH/ORH report) that describes this.

 

Thanks in advance.

Vinayd

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Typically, on a certian date, indices change their companies around (companies are removed, others added).  On the ATSG post, you saw that the shares rallied 20+% as they were ADDED to the Russ2k index (on Friday).

 

Modern indices are based on 'float' models, not strictly on market cap.  So ORH has a weighting in the index that is equivalent to the market value of the NON-Fairfax (+ other 5%+managment) shares outstanding.  The implication if this SELLING pressure was because of the Russell rebalance is that the recalculation of ORH float has been REDUCED due to the massive buybacks over the past year.

 

For a normal company, the rebalancing would be trivial, but in the case of ORH, they retired 12% (IIRC) of their shares in the past year, which decreased their float by 30% or so.  This is a large reduction in the effective weighting of a market/float weighted index.

 

So on Friday, with all the additions and subtractions, there were also rebalancing and that is what caused some funds to sell.  Basically, ORH on Thursday was 0.4% of the RUT index, and on Friday it was 0.3% (or so).  This caused selling pressure.

 

The above is my best explanation of the theorhetical issue.  I have not looked into the Russell 2k rebalancing policy or verified anything said above... just giving a float index tutorial. ;-)

 

Ben - Long ORH

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Thanks Ben for the great explanation.

 

In looking at the Russell additions and deletions -- it doesn't look that ORH was removed. So, that leaves some level of rebalancing by various holders of ORH.  But, someone still has to sell the 2.5M shares or ORH and someone had to buy them on that day. Also, the 1.4M block trade at the end-of-day looked as if someone decided to take the Russell rebalancing opportunity to get out of ORH for whatever reason. I'd like to know who was on the other side of that block trade!

 

cheers,

Vinayd

 

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Also, the 1.4M block trade at the end-of-day looked as if someone decided to take the Russell rebalancing opportunity to get out of ORH for whatever reason.

 

I don't think anyone took the "opportunity".  Any RUT index fund or fund with such a mandate would be FORCED to sell that day (assuming the rebalancing).

 

The price dropped as the bid to absorb that much selling activity is likely lower than the Thursday's close for obvious reasons.

 

No idea who was trading the block trade or even if it was a single party on either side... unlikely unless ORH got a call from an IBank that was being paid to offload a big stake from Vanguard/BGI/Fidelity at a discount.

 

We'll never know unless it was ORH; anything is possible.

 

Ben

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