Whatever , If you won't take it back " long term majority of NZX listings go bust."
We all know SBQ stands for "Shouldn't Be Quoted"
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SBQ: do you have an opinion on the accuracy of the data on finra?
e.g. https://finra-markets.morningstar.co...126:0P0001DKFB
in particular the accuracy (and timeliness) of the institutional holding percentage? It may seem like a non-sequitur but I reckon there is a direct link between institution ownership percentage and the availability of shares for short selling, i.e. in the main it's not the brokers arranging the shorts, its the large institutional holders. But I digress - do you know if finra is up to date and accurate?
some misleading statements here.... for instance
"regulations say you can't stay in short position for long. Such as when dividend dates are declared"
using CFD's (which is how I imagine most retail investors take short positions ) avoids this concern.
Liquidity is just a constraint on position sizing . so this will limit larger players but actually offers a liquidity premium to smaller players.
And you've been pulled up on the main grandiose statement regarding going bust. So I think you should consider being less authoritative about what amounts to only your opinions
If you read epower's link to the article:
" To avoid complications with imputation credits, short positions have to be closed out by the record date for any share dividend, limiting the length of time that investors can short blue-chip stocks."
Your reference to CFDs is misleading and falls under equity swaps (which has no relation to short positions although a person can take a short position under a contractual relations). The key difference being... Contracts For a Difference relies between 2 parties with clear distinct bets and this can either be on the long side or the short side.
A good example of where CFD have exploded was last month here:
https://wolfstreet.com/2021/03/29/ar...its-the-banks/
"A CFD is a contract between the trader, such as Archegos, and the broker such as Credit Suisse, Nomura, Goldman Sachs, etc. It’s a type of equity swap. Leverage can be huge, and trading is opaque and does not involve an exchange, but takes place between the trader and the broker or a market maker or between parties. In the US, CFDs are illegal for retail traders, but not for hedge funds."
I'm not seeing how small players will get a premium on low liquidity. What is more relevant I see with penny stocks is they go big on the debut and over the years.... they fizzle out in volume leaving the small guy stuck with shares that become il-liquid. Their limit order to sell could go sitting for days or their broker advises that you need to lower the price dramatically so the ask price is attractive enough.
I reaffirm my stance on investing in NZ shares. The historical contents shows companies on the NZX panders to the insiders and screws the retailer share holders by sprinkling them a bit of income streams such as dividends. They don't explain the full impact of share dilution (which I think happens way too often for the various listed companies on the NZX). What option do these listed companies have anyways? If the profits are flat, then expect the share price to be flat (or negative if they are forced on some dividend payout scheme - hint: I'm looking at The Warehouse Group).
I tend to view being a shareholder of a company means you're a "partner" in the business of the company. That means the insiders are on level playing field with the shareholders. This is not what I see for companies listed on the NZX. Have a look at this My Food Bag offering and sit back, wait and see all those insiders getting ready to unload; and therefore, such behaviours is nothing more than a 'bust' in my books.
Over in the US, SEC requires all insider trades to be disclosed within 2 days. When that information becomes public domain, then all finance websites can report it. You can subscribe to some websites that may give you a closer edge on the timeliness of information on such trades, but I doubt that would benefit the small investor. They're more for the large hedge funds that scalp all the time.
What makes a company a good candidate to go short on? A lot of that depends on the insiders position - if the CEOs, directors etc. own very few shares in the company then that says a lot as they may have a short time frame of wanting to stay working in the company. Or it means they don't have much long term faith? As in my previous post, when the directors of the company are aligned with the shareholder's view, then you have a company worthy to invest in. What I don't understand is here in NZ there are no capital gains tax on share ownership so there's all the incentive for the CEOs and directors of NZ company to own as much of it's shares of the company they work in, instead of relying on salary pay for so many $ millions.
The brokers in NZ really have no interest in serving retail customers with the ability to go short on any stock. They're not setup that way so rather than explain the systematic problems of the NZX and the push by insiders on corporate side, they rather tell the public that such an activity is viewed negatively. As i've said before, low liquidity means virtually slim chance the broker will have allocated shares so you can borrow. A lack of derivative trades (options and futures) available for the NZ retail investor too adds to the problem. Hell, the NZ FMA claims they're dangerous and should not be undertaken. But what they don't tell you that these forms of trades aid in the liquidity of the share. You need people to make wild bets in derivatives in order to create the liquidity (interest in the company). But to rely on an industry in NZ that people should only go long on the stocks? It's a lack of understanding how the system works, a lack of educating in tax inefficiencies. I mean when you step into an office of a financial advisor in NZ, he/she is not going to have a vast knowledge of taxation around the world for the many different stocks you can buy in. This is the job for the managed funds to figure out and i'm very certain they too don't know any better. A large part of Kiwi Saver I see is they collect all these premiums, and buy an index ETF in America like the S&P500 - but let's charge x 10 times more than what the ETF in America charges in mgt fees. Or let's not try to do complex math and just over-diversify everything, just buy the NZ50 index and leave it at that. Is this how you call "professional management" ? Comon' FMA, you can be sure the CFP in N. America know you're only just fooling the public in NZ.
@SBQ: I understand what you are driving at regarding NZX; there is no debate from me. It also irks me the likes of Smartshares charge decent fees for investing 100% of their funds into a Vanguard fund - that is daylight robbery. I understand short shares are not usually available to the little guy and that others front run trades via faster data etc., but I want to explore a couple of points to understand how we can identify potential short squeeze opportunities when shorters go too far. It is unlikely I would ever get access to short shares and I'm not about to start selling naked put options, so I'm focusing on short squeezes, hence my questions.
You mention insider trades must be reported in 2 days. What about institutions? Do they have to report by the end of the calendar month or some other timeline?
That previous link I provided regarding iBorrow - I wouldn't be too quick to dismiss that. The numbers agree to what is also reported here:
https://fintel.io/ss/us/nakd
From that link : "NAKD / Naked Brand Group Ltd short borrow fee rates are shown in the following table. This table shows the interest rate that must be paid by a short seller of US:NAKD to the lender of that security. This fee is shown as an annual percentage rate (APR). Lenders are funds or individuals that own the security that have indicated to the broker that they are willing to lend it out. Dividends paid to a shorted security go to the owner/lender of the security, not to the borrower."
Also, that link says their data is updated every 30 minutes. I believe you that the brokers are facilitating the trades, but they must be getting their data through a central body, not just their own clients otherwise the 2 links I provided would not exist. Unless there are other somewhat less formal or unreported shorts that happen purely within one brokerage firm? I think that would be too hard to coordinate and there is no apparent restriction of keeping both trades inside the one brokerage, hence the need for centralisation of data validating those links...? But I am digressing from the real issue. {Edit: I'm wondering were you turned down by TD due to being a retail client? And the lack of available shares was merely talk to make you go away?}
So whilst brokers facilitate the short sale trade, I think it is the institutions making their shares available (what individual would sensibly lend out their shares?). Hence the reason I'm asking about the timeliness of finra for institutions. Where other institutions end up on the other side of the short sale trade, this is how we see institutions owing >100% of shares. And where institutions own >200% of the float that is where they get themselves into a pickle by shorting more shares than are available to repurchase. There are a couple of entities getting dangerously close to 200%, where the reported shorts appear suspiciously low - hence this post.
SBQ, saying that a company reinvesting their dividend would generate higher returns rather than just paying out those earnings as dividends shows you haven't recognised the issues of operating in a small island market, such as New Zealand. By the time a company lists, there is generally not more than a four or five year time-frame before a successful company can 'conquer' the whole of New Zealand. From that point growth becomes harder as many who have crossed the ditch to try and repeat their successful kiwi formula in Australia have found to their cost. Retaining earnings for reinvestment only works if there is a clear path to reinvest those funds for future growth. For many kiwi companies there is no such easy path. So it makes perfect sense to return excess earnings to shareholders in the form of a dividend.
New Zealand is a very different business environment to the USA or Canada where by simply going to a different province in your own country, the market for your goods can grow by 100% without working through tax, employment and other 'foreign' legal issues.
If an NZ company pays out all of their earnings as dividends this is the company saying that you as a shareholder can probably earn a better return on these funds than we the company can. And in a lot of cases they are probably right.
You are also wrong about the tax situation of NZ dividends paid to NZ shareholders. Tax in NZ is paid by companies on their profits. There is no extra tax generated by paying a fully imputed dividend to shareholders, because a fully imputed dividend means that the company has already paid tax on those profits and you as a shareholder don't have to pay any more (bar small adjustments between your personal tax rate and the company tax rate). This is quite different to the situation in the USA where companies pay tax on their profits, and when a dividend is paid those profits are taxed separately again in the hands of shareholders.
SNOOPY
what sophistry is this ?
are you seriously excluding a CFD from the universe of short positions because its an equity swap or some such rubbish???
I dont know how far you want to go to prove your point but I am currently short AIR and whatever you want to call it I will benefit if the price falls. If thats not a short position then blow me down I'm a fairy princess.
@ SNOOPY:
Have a look at Warren Buffet's recent shareholder meeting 2 days ago:
https://youtu.be/gx-OzwHpM9k?t=11336
Play it from that time mark where he explains why paying dividends is not a good way to return shareholder value (for the RIGHT company). He explains it in the case where a shareholder wants to get out (in the eg. the 4th partner in the DQ franchise example):
"What could be more logical if a very small minority of your shareholders want to get out, and most of them want to stay in... you don't give the money to everybody (ie paying dividends)... You give it to the person that wants it."
He's also mentioned in the past that he would rather do share buy backs than to pay dividends which essentially increases the value of the stock and thus shareholder value. Then let the shareholders benefit from the capital gain (for which in NZ would be 100% tax free unless under FIF / FDR). But that is not what we are seeing in NZ. I am not wrong in saying there's a tax disadvantage in collecting dividends ; we've been over this before (Snoopy) in other threads and on most part, most NZX listed companies do not give the FULL 100% dividend imputation credit.
What i'm hitting at is where is this requirement that NZ shareholders want dividends? I've seen this advertised by NZ brokers such as Macquires in their fancy prospectus brochures. I've seen examples like The Warehouse Group (since living in NZ for the past 25 years), that they subscribed to a dividend paying policy but during their expansion in the 90s and early 2000s, they went on a loan borrowing scheme and flooded the market with new share issues after another (share dilution) so they could open up red sheds all over NZ. It seems the largest retailer at the time does not know how to retain share holder value. But when the NZ investment environment, your professional advisors, the NZ gov'ts, everyone in industry subscribes that dividends should be paid - then that's a good enough reason for me to keep my $ out of the NZX.