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Apr 2, 2012
Where to from 8¢
Written April 1.
Updated and Posted early April 3, 2012.
Fallout from the EGM is still a work in progress. My favourite indicator is what Mr Market thinks. Regular readers know my views on “follow the money” and “watch what I do, not what I say”.
Mr Market is rarely wrong, and when wrong he’s rarely wrong for too long. Markets aren't perfectly efficient but they're not as inefficient as non-performing boards would have investors believe.
Everything else is opinion but share price is objective. Harry Boon and the the Board have been judged.
Three charts tell the story.
Chart 1 - 7 weeks of Price Action and Chart 2 - 12 months of PPX were posted immediately following the EGM where I predicted a share price fall was to follow.
Dare I suggest that Mr Market agrees with suX.
CHART 3a - PPX from Nov 2011 to 30 March 2012 shows six trading days since the Boon win, when PaperlinX (PPX) closed at 8.0¢. This now gives a whopping 33.3% loss since the EGM.
Significantly, 8.0¢ is lower than the intra-day of a low of 8.8¢ during the highly volatile two hour 14 million share volume bloodbath immediately following the EGM.
Now we seem to have slow solid decline by disillusioned bulls, with share price falls in five of six trading sessions.
The only "up" day was Monday March 26 when Director Lyndsey Cattermole's buying accounted for 42.7% of that day's volume, see ASX Appendix 3Y here and the Financial Review ran a bullish article PaperlinX 'war' is not over - Price
Up by the stairwell, down via the elevator shaft.
The price rise from 6.5¢ to 12.0¢ (+85%) was sustained over seven weeks. The fall from 12.0¢ to 8.0¢ (-33%) has been like a hot knife through butter. Note to investors - It’s just a flesh wound.
Where to from 8.0¢
This is an important "round number" price. It has been the subject of support/resistance in the past.
Expect some stabilisation at 8.0¢, however there is "thin air" between 8.0¢ and 6.5¢. By “thin air” I mean how rapidly the fall from 8.0¢ to 6.5¢ occurred in January and the rise from 6.5¢ to 8.4¢ occurred when Andrew Price declared his hand.
In the absence of new money giving real confidence, i.e. confidence external to PaperlinX restructuring announcements, I expect prices below 8¢ before prices above 12¢.
Eventually, those vulgar opportunists will buy but don't expect them to be in a rush until more disillusioned bulls are shaken out. It's nearly time for a major Boon supporter to start selling to Andrew Price like happened in January.
The only announcement that PaperlinX can make to give confidence is if Messrs Boon, Marchant and McConnell all match Lyndsey Cattermole’s buying. Then we’ll see what board solidarity means. Action, not words.
Don’t hold your breath if Mike McConnell's share buying actions are an early guide, see Introducing $86MAN here.
The message is clear – Mr Market remains unhappy with Mr Boon as Chairman and everything that presently flows from that, and some of his co-directors aren't helping the Boon cause.