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Exactly, MS pays them a pre-determined interest rate for the pleasure of borrowing their shares. So MS will need to make enough money from shorting to cover the interest cost and then make a profit, and once they feel they can't get the price any lower they will cover their short and return the shares.
I think the filing is a bit misleading because although MS received ~160mil AVH shares (and sold about ~22mil so far) they don't own the shares, they are simply borrowing them. The only reason I can think of MS wanting to borrow AVH shares is for purposes of shorting them. But remember, the investment firms that are lending MS these shares are the same long-term investors that have caused AVH's share price to rise all year (Karst Peak, Redmile, Vermillion, etc.). Ultimately, these large investors want to see their investment increase in value (just like us) and can call back their shares from MS whenever they would like, forcing MS to buy them all back in the market... remember that.
I personally don't think we will see much of a pop from the Nasdaq uplisting (at least not immediately) as it is already baked in. It's been public information for a while now, everyone following Avita knows they are in the process of uplisting. So I don't think Morgan Stanley was waiting for the uplist, they entered their shorts on Friday, right before AVH joined the ASX, so this could've been part of a broader strategy to short companies that joined the ASX indices. Either way, they will eventually need to cover their ~30mil short shares, an action that could be forced on them sooner than later if Q3 sales are good or if the funds request their borrowed shares back sooner.
I'm no expert but if you look more closely at the filing Morgan Stanley didn't become a substantial holder of ~138million AVH shares by purchasing them. Rather they are borrowing the shares (hence the "collateral received" transaction types) from many of the hedge funds that are large AVH holders. My only guess as to why Morgan Stanley is interested in holding these shares as collateral is so that they can short the stock, which is what appears to be happening given the heavy increase in shorts starting on 9/20.
While it's not good that MS has taken such an interest in AVH, if Avita continues to deliver positive sales growth MS could be forced to cover their shorts, providing a nice boost to the share price. Another thing to note is that you can see in the filing that most of the lenders are familiar large Avita investors (i.e. Karst Peak Capital, Redmile, Compass, etc.), who still technically own the shares and therefore these firms are still very much desiring to see AVH stock perform well. Their interests are lined up with ours, and per the sec lending agreement they can call back these borrowed shares at any time, forcing MS to cover any shorts they opened.
Where did you see this? I assumed BNY would still be charging us the ADR fee since AVMXY will still be an ADR (and I assume still administered by BNY), but will just be trading on the NASDAQ instead of the OTC.
I'm not sure what the current short position is, but the ~28mil shares that were shorted over the last 3 days represent about 1.5% of the entire outstanding shares. Much smaller than 20%, but still a large percentage considering we haven't seen this much shorting in a while.
Watching Australia trading right now...another 3.8 million AVH shares were shorted on 9/24. So on each of Friday, Monday, and Tuesday roughly 22mil, 2mil, and 4mil shares were shorted respectively. That is quite an uptick in short interest, and even more interesting is that it hasn't driven the share price down very much. Things could get very interesting when these shorts start covering...
https://www.asx.com.au/data/shortsell.txt
I'm not seeing any new articles, just some news that Bell Potter downgraded Avita from buy to hold.
https://seekingalpha.com/news/3501072-piper-likes-edwards-lifesciences-premarket-analyst-action
I also noticed on Friday that someone shorted 22 million shares of AVH, and I wouldn't at all be surprised if the two events are related... either way it will be fun watching as those shorts eventually have to cover, adding fuel to the fire.
https://www.asx.com.au/data/shortsell.txt
They will still need some additional funds (even if you exclude the additional trials they are funding) and my guess is this will likely be another capital raise, however I don't believe this will happen until Q1/2 next year.
I found the below line from page 50 to be interesting... Avita says they have enough cash to run the business over the next 12 months. As of 6/30 they had $29mil in cash, and with a quarterly cash burn rate of about $10mil that would put the cash balance at $0 on 3/31/19. The fact that they are forecasting to have sufficient cash well into the middle of next year may show management's confidence in how sales are progressing.
"As a result, we believe there is sufficient working capital to support the committed research and development programs and other activities over the next 12 months and the Company has the ability to realize its assets and pay its liabilities and commitments in the normal course of business."
CELS appears to be the symbol for the Nasdaq Clean Edge Green Energy Index. Since this is an index and not a publicly-traded security I would think the ticker is still fair game for a company to use.
I don't think this is an offering as I believe Avita could only offer new shares of AVH on the ASX as that is the only exchange where their shares trade. BNY Mellon manages the ADR shares, of which they can only create new ones by buying and holding AVH shares.
Interesting.. it looks like Bank of NY Mellon is needing to create additional ADR shares to meet the demand. Not sure what the $5 price level would mean though since I would imagine the only way new ADR shares can be created is by purchasing AVH shares at market.
This surprised me as well that the MMs were willing to part with 14k shares at $7.66 as soon as the market opened. The fact that they then bought those shares back at $7.91 means they lost $3,500 as a result of allowing this to trade at such a discount to AVH. Unless there are enough AVMXY sellers today to match the buys, the ADR sponsor will need to buy more AVH shares tonight - and it will cost them more than the cash they received.
Still trying to figure out how they are not losing from the ADR's discounted trading...
I wouldn't read much into the price changing after the closing bell since OTC stocks are not traded after hours (what you are seeing could just be a technical issue with your broker). You will notice that the bid/ask quotes for AVMXY in the morning, prior to market open, generally reflect the movement of AVH overnight.
AVH is the ticker for Avita's primary stock listing, which is on the Australian exchange. AVMXY is an ADR that represents 20 shares of AVH and trades on the U.S. OTC exchange to give U.S. investors the ability to invest without opening an Australian brokerage account. Mathematically, one share of AVMXY should be the same value as 20 shares of AVH multiplied by the AUD/USD FX rate. This relationship generally holds, however at times the two can drift. Right now AVMXY is trading at a discount to AVH.
Here's a new article about the Wexner Medical Center using Recell.
https://www.thelantern.com/2019/09/wexner-medical-center-uses-spray-on-skin-to-treat-burns/
I am still perplexed as to why the ADR continues to trade at a notable discount to AVH. AVH is leading this latest run as told by the surge in volume and the below average volume of the ADR. It appears that in spite of the low volume there is a large holder gradually selling ADR shares into the market (although there are no recent SEC filings so I don't believe it is the few institutions that are invested in the ADR), and the market makers are taking advantage of the lack of buyers to suppress the price and profit on the difference. The discount doesn't bother me as I know long-term these imbalances will be corrected, but it is very interesting to me. Something tells me that whenever this seller (or sellers) is done the ADR price will quickly come back in line with AVH.
No, the proposed Nasdaq uplisting of the ADR and AVH's addition to the ASX 300 are unrelated.
Avita added to the ASX 300 index tonight.
https://hotcopper.com.au/threads/ann-s-p-dji-announces-september-2019-quarterly-rebalance.4949851/
I'm guessing you sold today, Mike?
0.49 right now in ASX trading... it appears AVH is still under accumulation as we've now fully recovered from Friday's drop.
It would seem that the drop was due to the full year results, but I am a bit surprised if that was a reaction to the filing as the year-end financials have already been released and known to the market via the quarterly filings.
I wouldn't worry about it as it seems like it's just market makers taking advantage of people placing market orders in a low volume environment. AVH has been doing well lately, moving up on higher than average volume. For the time being, it appears interest in the ADR has faded a bit, which I believe is why it is trading at a bit of a discount to AVH (market makers can let the price stay down more easily if few are buying). I wouldn't worry about this long term though as if the MMs allow the discount to widen they risk being played by investors that own both securities capitalizing on the arbitrage opportunity. And once volume picks up in the ADR, this disconnect should correct itself.
Another night of accumulation on the ASX... 0.48AUD right now on ~3million shares traded. This translates to AVMXY at ~$6.50/share with the current FX rate. I'm still surprised by the almost 10% discount that AVMXY is currently trading at compared to AVH. Can't really think of a reason for why this would persist other than the current low volume on the OTC exchange enabling the discrepancy. Also surprised that large investors that hold both AVH and AVMXY, like Black Crane, are not taking advantage of the arbitrage opportunity and buying AVMXY while selling AVH, which would be close to "free" money.
Another news article posted today about Bridgeport Hospital's burn center using Recell. A nice quote from Dr. Savetamal regarding Recell... “We’re very pleased with what we’ve seen so far,” Savetamal said. “And we’re very optimistic about using it going forward.”
??https://westfaironline.com/115630/bridgeport-hospital-offers-novel-spray-on-skin-process-for-burn-victims/
I don't know for sure, but wouldn't we see the Form 20F once it is submitted just as all SEC filings for Avita and other companies are publicly available once filed?
There are no new filings yet to confirm more institutional purchases, but the volume on the ASX overnight has increased notably as the price simultaneously rose to 0.44AUD, suggesting that a large player is accumulating. If I had to guess, we could have a new buyer this time as historically Blackcrane has usually accumulated shares in both AVH and AVMXY at the same time, however the volume in AVMXY this time does not suggest any sizable accumulation is occurring in the ADR.
Some more positive news coverage for recell, this time from the Wexner Medical Center.
https://abc6onyourside.com/news/local/spray-on-skin-offers-breakthrough-treatment-for-burn-wound-patients
I don't want to jinx it but we may have just broken out of our recent trading range for good.
People are browsing, just not much action to comment on lately. Although I will say from watching it trade on the ASX yesterday and today it appears someone may be accumulating shares again. It popped to 0.42 today and yesterday on increased volume.
I wouldn't believe it. This would be confidential information that Westwicke would only be allowed to discuss with Avita, their client. They would know better than to discuss this with anyone else. Not to mention even besides client confidentiality, this would be insider information.
My bad, I read too quickly. Thank you for correcting.
Dr. Fiona Wood will be speaking at a conference in New York next week.
https://gsweekender.com.au/fiona-wood-burns-specialist-great-southern-speaker-series-albany-aec/
I took a quick look at the new presentation and will need to go back and scrub through it more closely when I have the time.
First impressions are that most of us assumed Recell would eventually be expanded to much larger audiences outside of burncare, so it is nothing surprising to me, however I was surprised to see they plan to also target the outpatient burn market as well (and am wondering how they plan to execute on this (i.e. will the outpatients treat themselves? will they lower costs for this segment?).
Now that these additional target markets have been officially "announced" via this presentation I feel the company has a lot of work to do in terms of defining concrete milestones and timelines as investors will now be looking for these, and once provided, investors will hold the company accountable in reaching them. There was a lot of potential added to then new presentation and I hope Avita is prepared to deliver.
You probably just need to update your FX rate. AUD has hit a new low vs. USD recently, currently around 1 AUD = $0.68 USD.
0.40AUD X 20 X 0.68 = $5.44
AVH already back up to 0.40AUD tonight on less than 1million shares, equivalent to roughly $5.44 AVMXY. This thing moves like skates on ice with such light volume.
I think it's safe to say that our friend Blackcrane is back.
Another thing to remember is that Blackcrane and SEI Investments are really the only two institutional investors in AVMXY (there are others that hold AVH directly) so when we see big down days like this in AVMXY and neither of these two institutions are selling (and they haven't been so far based on filings) we can conclude it's mostly "small fish" either taking profits or getting scared and selling.
Yes, and remember that is their average. If you look at the ownership filings you can see they were buying all the way up to $7/share on that pop in April (I believe they invested over $1million just on that day alone) so clearly they are seeing value in this stock even at $7. Remember from their investing philosophy diagram that their "full position size" for their top picks is ~10% of the portfolio. Their current position only represents about 5% of their AUM so assuming that Blackcrance considers Avita one of their top picks (which they very likely may considering it's one of the few positions they posted a write-up on on their website) then Blackcrane could be looking to add ~$40million more. Not to mention, there could be other investment managers eyeing to start a position on these dips.