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GEN - Spørgsmål fra Hollandsk investor

76050 Helge Larsen/PI-redaktør 4/2 2018 23:33

"Dear Helge Larsen,

I am a fellow investor in Genmab for more than 10 years and therefore an avid reader of any information concerning the stock. I subscribe to Blogbuster and read, via Google translate, the ProInvestor forum. Although I am not interested in becoming an active member, lacking detailed knowledge, I do have a question which could be of interest to the forum. Perhaps you could answer or post this view on the forum.

My question concerns the short-selling and possible strategy:

There is possibly a huge disconnect between the market-value and the intrinsic-value: some suggest a takeout-value 4-times as high,
ownership is concentrated with large parties: > 60% in firm hands, not willing to sell for anything less than the intrinsic-value,
Big Farma is in need to replenish their pipeline, paying top-dollar for takeovers,
Genmab could be next/ will be next....

Now suppose I am a big player and I sell short. I use the proceeds to buy a bull product: turbo, cfd, and what not:

The short-selling keeps the share-price under pressure: I can buy my turbo, bull certificates even lower...(or even regular shares if I want to build a position)
If the share drops even more, I lose on the turbo, but I can close my short position,
If the share rises, the gains on the turbo are much higher than the loss on the short position,
If there is a takeover, I can gain even more by creating/contributing to a short-squeeze and then selling my turbo at the self created peak and closing the short position.

I hope I did not make a total fool of myself by asking this question.

Wishing you, your forum, an Genmab all the best from the Netherlands",


7/2 2018 10:24 TeamGarlic 176051

Very good question.
The trick is the first scenario: if share price drops you lose on the turbo. It could actually be worthless. Where is the equilibrium in this trade ?
For scenario 2 you will have to find the equilibrium for the gains on the turbo compared to the loss on the short position.

Now this includes math to a high degree, but also your expectations for the share price. I'd say this is not easy to calculate. You will have to pay for a premium for the short position and pay recurring fees for the turbo.

For me this would be a no-go. I'd rather watch the TA and trade the stock.

8/2 2018 10:34 Occam 276052

I suppose this is similar to betting on two opposite outcomes using different odds at different brokers. It may be possible to create a sure-win situation for yourself.

I see three problems in your case:

1. You may be accused of illegal stock market manipulation.

2. Since your counterparts are professionals your marginal gain could be quite small. So to make the operation worthwhile you must do the operation on a grand scale. This could affect the market prices so your advantage disappears.

3. If you succeed on a grand scale somebody else may go broke so you will not able to collect your gain. After all shorts and bulls are not guaranteed by the taxpayers.