The philosophy behind gaps needing to be covered seems to hinge on the presumption that there were orders that were skipped over when markets move the pps past the terms of unfilled orders. In this day of computer assisted trading, I can see maybe there might be gaps during pre and post market periods if orders were not being recognized from houses that do not do pre or post market trades, but computerized trading ought to still capture valid orders, yes?. So, what is going on here with Cliffs trading?
When it comes to the large short position coverage (still around 75 million shares??), I wonder how the MT acquisition terms weigh into balancing that out or if the short even needs to be covered? Early announced terms for the deal indicated 75 million common shares would be issued to MT upon deal finalization. Then we can consider how the deal adds just under 20% more shares to Cliffs shares outstanding (up from about 400 million shares) and how the proportion of new earnings for Cliffs looks to be a much bigger segment than 20%, favoring better overall profitability. Cliffs is assimilating some MT debt and higher pension obligations, but overall, Cliffs appears to be emerging as a more profitable company with the acquisition which is in addition to COVID recovery improved market demand, post vaccine optimism and the higher US and world market unit pricing for iron ore and steel.
I am not clear about what Cliffs pps target is best supported but appreciate the directional upward movement in the pps appears warranted. The recent analysts’ $12 to $15.75 pps range is a directional start... That 4q 2020 earnings report due in January might give a more clear picture if it includes the impact of the earlier AK Steel acquisition and ongoing MT US asset acquisition. Lot’s going on to digest and understand here...
