Carillion Share Discussion Threads

[kiwihope] 03/2/2017 11:04

This is getting a bit silly.

Don't blame the shorters for the low share price. It's like all those stupid theories I hear about evil market-makers conspiring to drive down the share price.

There is a very good reason Carillion has been targeted. It has high debt, large pension deficit, low margins and static profits. You don't need to look for anything else.

It's obvious that the dividend yield is an attraction and supporting the price. But if things go wrong over the next few years that may have to be cut. Then what will be supporting the price?

The shorting started when the convertible bond was issued. There may be a hedging effect in this (bond long, shares short) but no too much. From what I read the market was surprised Carillion issued the bond so near its year end - apparently this is unusual. Whether it is or isn't it attracted attention.

But make no mistake. If Carillion had lower debt, a smaller pension deficit, was not in the low margin construction/service sector, it would not be shorted like it is. The shorters see an opportunity to make money by shorting a vulnerable company. End of story.

[jaf1948] 03/2/2017 10:40

kcsham,

Thank you. Many years ago, someone told me about the 'so what' test. When presented with a problem or a difficult situation, ask yourself 'so what ?'. That is all I have done here. It usually works.

[kcsham] 03/2/2017 10:35

JAP & blackbear - very sensible and intelligent comments.

[blackbear] 03/2/2017 10:26

The best time to invest in a perfect storm.

[jaf1948] 03/2/2017 10:12

It's all getting a bit silly. CLLN is in no worse state than many comparable companies but the shorters have got control of the share price and there's very little anyone can do about it.

The question is, does it matter ? For LTHs who are mainly here for the dividend, the actual share price is irrelevant if they have no intention of selling in the near future. The yield does not appear to be under threat so it is attracting some new buyers which offsets some of the shorting. In short (no pun intended), there is very little point in getting uptight about the situation at the moment.

[edmundshaw] 03/2/2017 10:00

RCT2 the only problem with comparing debt and pension deficit (or anything else) to market cap is that the market cap is the very thing that is being manipulated down to make those ratios worse. So it is a ratio I would use with caution - at least look at the ratio after adjusting it to allow for a possible non-shorted price of 280p-320p.

[jaf1948] 03/2/2017 09:53

Pogue,No, I don't think it is coincidence either and it is probably a factor in the initial shorting. What is happening now however is that the shorters are continuing the fall mainly because they can.

[pogue] 03/2/2017 09:23

JAF1948
you touched on another point I forgot about the shorting started in 2015 at the time of the convertible bond issue IIRC, coincidence?

[w1ndjammer] 03/2/2017 09:20

it will require a catastrophic event to enable the shorters to exit

maybe they still believe the UK will witness an armageddon event due to brexit

WJ.

[rcturner2] 03/2/2017 09:14

BTW having gone back to examine the IC data about Carillion, where they score very badly is market cap as % of the EV when debt and pension deficit are used in the calculation of the EV, ie Carillion's market cap is low relative to the debt + pension deficit. Whether this is a useful measure is anyone's guess, but Carillion have one of the lowest % on the whole stock market on this measure.

[jaf1948] 03/2/2017 09:14

pogue,

I disagree - there doesn't have to be a reason ! 100m+ shares are currently held by shorters. They were expecting, and have been expecting since 2015, that CLLN would have a bad time like most of its competitors. Since this didn't happen, the shorters put the usual plan B into effect - keep selling small amounts into the market thereby keeping the share price falling (it doesn't take much to move CLLN's share price and also note the very large number of small transactions daily). The shorters can easily afford to do this when they are sitting on such large profits already.

The continual fall also creates its own downward momentum with holders thinking there must be something wrong with the company and sell, and new would-be investors are put off buying (especially with all the shorters !).

In other words, the shorters have created the perfect storm out of nothing, and unfortunately what they are doing is legal.

[bookbroker] 03/2/2017 09:12

I would countenance the thought, but the contract situation, it makes them vulnerable to over-runs, and the foreign element, but there is really very little reason to explain the level of short interest, just seems that facilities management cos. are often seen as cannon fodder!

[w1ndjammer] 03/2/2017 08:53

RCT

i have first hand experience with CLLN all be it a few years back now, but
one thing i can guarantee is that this Bod are squeaky clean, and that runs through
the company down to the Site managers. This ship is as tight as a gnats ass

i used to supply labour to CLLN and run small projects upto 1 mill

i have no inside info and have no contact with them now

WJ.

[rcturner2] 03/2/2017 08:39

If you look at some of the big shocks recently, BT for example and Tesco, they both involved corruption. Carillion has quite a lot of activity in Middle East, I wonder if the shorters believe there is something to come out? This is the only possible explanation I can think of.

[lord gnome] 03/2/2017 08:23

pogue - the bond holders are not the shorters.

[w1ndjammer] 03/2/2017 08:20

its an enigma

WJ.

[spoole5] 03/2/2017 08:16

Why has carillion been so targeted by shorters when others in the sector have smaller margins and quite big debt eg kier, and mitie seems to hold up ok despite 3 profit warnings?

[w1ndjammer] 03/2/2017 08:10

pogue

imo the shorters are trapped 107.5 mill of shares need to be bought to unwind the
position plus on top of that if the share price starts rising, the traders will pile in
and start buying. Its a low volume stock, as long as CLLN don`t drop the ball,there will be fireworks here eventually in the meantime the over 8% divi is nice.

WJ.

[pogue] 03/2/2017 08:02

I was looking at it from the point of what the shorters are trying to achieve as the view appears to be that the shorters are the bond holders. If the bonds convert at £2 then they may avoid pushing it below £2 if however it is the company that decides on any conversion below strike then I agree its not the bottom.

[w1ndjammer] 03/2/2017 07:54

No only CLLN can convert the bond at any price below the strike price, but why
would they. they just need to issue a new bond to pay off the old one.

WJ.

[pogue] 03/2/2017 07:32

Did I read here a while back that the convertibles also convert at £2? Is that the bottom?

[bookbroker] 02/2/2017 20:53

SPD a bit different, likelihood only diehards remaining there, MA. will get it on the cheap, it seems that many institutions have issues with corporate governance there, they probably desperate to sell, doesn't pay a dividend., so why hold!

[blackbear] 02/2/2017 19:31

They do, they thought corus was going bust when they needed 100m short term I bought them at 4p and the rest is history.