Carillion Share Discussion Threads

[edmundshaw] 16/6/2017 17:03

Wally, When IRV shelved the dividend it was because of a horrendous contract that went from bad to worse as subcontractors failed. And yes the share price halved (at least) on the back of that. Mitie has also shelved their dividend. Where is the share price there now? It has bounced from lows of 190p to now 300p.

You cannot equate dividend cuts with price action. Another example off the top of my head, Aviva cut their dividend back in 2013 when the share price was around 300p - from 26p in 2012 to 14.6p for 2013. The story there is a bit complicated - a change of management in particular - but the price has since recovered to 536p. So investors there have enjoyed perfectly decent yield and excellent capital gains to boot from 2013; the current divi is back up to nearly 24p and set to rise further.

For balance I should say there are certainly cases where the dividend has been reduced due to poor performance that doen't look like turning around afterwards to get that profitable recovery. But I don't see any reasons (similarities with other poor performers) to expect that to be the case with Carillion. When the dividend gets overstretched, sooner or later a rebasing is on the cards. But that does not predict either future profitability or demise.

[nomdeplume] 16/6/2017 11:46

RCT, Don't get me wrong. At 350p the share price WAS too high but we are now below 200p - a 50% drop. I am not arguing that the share price should be 350p and will go back there once the shorters exit. My position is that, given the level of debt etc., this is not an unfair price. In the absence of more bad news there is no reason for a further fall and, in fact, there seems to be reasonable support at this level. When the short is ended, there will be a bounce. In the meantime I own a share paying a good dividend which, over time, is likely to recover.

[kcsham] 16/6/2017 10:07

By the way shorting is used much more often in CFD/bettingon a stock than longing because it needs much less capital investment. Longing a stock you need to pay interest on the part of the money you borrowed for your leverage in you dealing. You always need to pay what you buy even in CFD or betting instruments.K C

[kcsham] 16/6/2017 09:57

If anybody on this discussion board is interested to know how the shorters could know more or better than our layman investors, may I suggested you go back to previous discussion item number 3787 and read on from there. I believe you will not be disappointed.By the way, discussion item number 3823 was W1NDJAMMER's contribution that opened my eyes for certain and I believe it is worth a read as well.Spend a little of time on the past may save a lot of time at the present.K C

[kcsham] 16/6/2017 09:39

nomdeplume - you are right! Whoever invested or betting in the stock market should not counting their chicken too early based on their book value. A profit is a profit until you realised it.K C

[wallywoo] 16/6/2017 09:26

To me for the next 8-10 months the share price future depends on:

1) Will they make sufficient profits / cash to maintain the dividend

People talk about not being a big deal if the divi is cut. But I see it likely that the divi will be axed for a year at least, while they restore the balance sheet.

When that happened to IRV, the share price dropped another 40% and is now around 60% less mkt cap than clln, with around the same level of t/o.

[rcturner2] 16/6/2017 09:26

nom, all trades have a buyer and a seller

shorting at Berkeley had no effect on the price and indeed the price has risen strongly there

if shorting itself takes the price down, why doesn't people going long take the price up?

[nomdeplume] 16/6/2017 09:22

RCT, If you sell 24% of a company's shares, what do you expect will happen to the SP? You can't calculate the profit until you have bought them back.

[jaf1948] 16/6/2017 09:11

yump, good post.

[yump] 16/6/2017 09:01

Given that share prices move on greed or fear, I don't think there would be anything very sophisticated in the shorters' analysis in terms of the actual business itself and its prospects. Put another way, what criteria would you use to target a company for shorting ? Or the opposite way around, what criteria would you use for ramping ?

Those criteria imo would all be to do with ultimately what sentiment you could stir up, as a result of finding the sort of stuff that you can use to stir up sentiment.

There may well have been an in-depth analysis of the business, but I don't think it would have been to assess whether the business was a good, secure or stable business or not.

Its to do with how many potentially good or bad things you can find and how quickly they might change (ie. as a shorter you don't want any likelihood of sudden great news and as a ramper you don't want the reverse, as both will dump you in it.)

What has been and is the likelihood of CLLN suddenly producing great news that has a material effect on the business ? Pretty small imo - more likely to be gradual news - so shorters less likely to be caught out. They stay in control of their closing out.

[jaf1948] 16/6/2017 08:53

Absolutely correct. For all the talk about how much knowledge and analysis the shorters are doing, it is just a smokescreen for instilling fear and greed in the market place.

[wallywoo] 16/6/2017 08:48

Fear and Greed : Is that not what drives the stock market?

[jaf1948] 16/6/2017 08:43

Yes, the shorters got it totally wrong. They made their money by scaring the market and potential investors, not from their brilliant analysis that CLLN was going to do badly.

[rcturner2] 16/6/2017 08:39

The shorters profits so far are over £50m and could easily be £80m.

[rcturner2] 16/6/2017 08:38

JAF, the share price has gone from over 300p to under 200p, you call that getting it wrong?

[wallywoo] 16/6/2017 08:38

JAF: I do not short companies but you talk about them as though they are evil and are actually causing the demise of companies. They are just betting that the share price will be lower, where you are the opposite. The share price is effected by both. It is not their fault that they believe that the companies fortunes are not good.

They did not get it wrong since the share price is on a 9 year low point and is 40% lower than it was 2 years ago. The bets are higher than ever, so they expect something significant to happen soon. Ever heard the term "don't bet against the market". Some sayings make a lot of sense.

[nomdeplume] 16/6/2017 08:34

The shorters have waited a long time and in one sense have been vindicated, in that the share price has fallen. Two years ago, at 350p CLLN may well have been overvalued, but can the same be said at 200p? While it is easy to give shorters some elevated status over individual investors, should they be given more weight than the analysts covering Carillion? All those analysts have a target share price above the current price. If the current share price is too high, what would be a fair price, and WHY? Quite honestly I'm fed up with nothing but "the shorters know best" - put up or shut up.

[jaf1948] 16/6/2017 08:12

RCT,

The big shorting began in early 2015 based on whatever logic these people use. They got it wrong - the company has gone along quite well for the next 2 years. The shorters have only succeeded by persuading gullible people that they must know what they are doing.

Eventually, the company will come good or get worse - those are the two most likely outcomes. The shorters have no more idea which one it will be than anyone else. If the company does badly, the shorters will get a lot of money and will go on about how wonderful they are. If the company does well, they will take the hit and go off to make some other company's life difficult.

[11_percent] 16/6/2017 07:51

The battle is for 200p.

[rcturner2] 16/6/2017 07:48

JAF, the shorters can wait a long time, as I have said before they are not spivs with an IG account. The fact that they are still holding and have not cashed in their profits tells you that their analysis has not changed. Only when the shorters have exited will we know whether they were right or not.

[nomdeplume] 15/6/2017 15:42

It will be interesting to see if the short is maintained in the run up to the trading statement, which is less than a month away. Anything half positive will see the share price rocket.

[wallywoo] 15/6/2017 14:58

lol, nope afraid not. I am pretty sure in 6 months + this share will be worth a lot less than today, but as I say time will tell, hope I am wrong

[jaf1948] 15/6/2017 14:48

wallywoo,

So summarizing, you sold because the shorters got it wrong.

The shorters were expecting bad news from the company, which never happened, so instead they shorted in such large volumes that it brought the share price down through a combination of fear and legal manipulation.

You are correct that the share price action did not look right. On any day, look at the trades and there are hundreds of small trades, many within the same second. In one way, you are totally correct to get out of CLLN and without doubt the shorters are manipulating (as I said legally) the share price but you are incorrect in believing that the shorters actually know something about the company which justifies their shorting.

[wallywoo] 15/6/2017 14:19

2 reasons nom:

1) you are always learning in this game

2) the scenario attracted me (I could see a huge short squeeze coming), its why I bgt, but the share price action which is the same for any share just did not seem right.

You have to forget about your emotions when a student of the stock market. It makes your trading much worse IMO.

[nomdeplume] 15/6/2017 14:14

So do I! Incidentally, I rarely follow shares I've sold; there doesn't seem much point and it might be painful.