buyers and sellers

Folks on this thread who keep speaking of "churning" or there being "one big seller" are wrong.

In fact there are a number of legitimate buyers and legitimate sellers, although some are using algo trading methods which might give the impression of some kind of "price manipulation" occurring. While the algos are minimizing the average size of each trade, as far as I can tell, ETC's share price is a currently a function of normal supply and demand between buyers and sellers.

For the month of July, approximately 24mill shares in ETC traded. Of this 24 mill, roughly 7 mill were traded by 'retail' investors or smaller scale day traders (i.e., your typical etrade or comsec user). A further 17 mill (approx) shares were traded by insto or professional (top 40) investors (most anonymously, some through Lodge).

Regarding, ETC's top 40, there were 6 sellers last month, who sold a combined 17mill shares (approx). As far as I can tell, of these 6 sellers, 4 are now out of ETC completely, and 2 remain. The two remaining sellers, of course, may continue to sell with a view to exiting the stock, or they may merely be selling down.

I've done about as much research into ETC as a company outsider can do, and I'm as confident as an outsider can be that the insto sellers are selling for non company-specific reasons. Indeed, I can confirm that one of these sellers has a mandate to de-risk its entire portfolio, and has been selling a wide basket of biotechs and small caps all year.

Interestingly, while there were 6 top 40 sellers last month, there were 10 top 40 buyers (some new, some existing), who bought a combined 17mill shares (approx). So all of the insto selling was soaked up by insto buying, and there are in fact more buyers than sellers. The top 40 still owns a combined 74% of ETC stock. Some of these buyers are grouped under nominee account names, and so I have no idea who they are. But I can say, that at least one of the recent large buyers in ETC has a holding account based in Hong Kong. I'm also aware that a well-known member of Australia's small-cap fund manager community has a sizable personal holding in ETC. So some fund managers aren't just put their fund's money into ETC, they are putting their personal cash into ETC as well.

Assuming the 2 top 40 sellers continue to sell (and today's activity indicates that they are), and assuming average daily volumes are maintained, I would expect these remaining sellers to be completely out of ETC in around 2 weeks (but keep in mind this timeframe is pure guesswork on my behalf). Once this inso selling is complete, and assuming the current positive macro-trading environment is maintained, the daily sell volumes from retail investors will no longer be sufficient to maintain the current price range and real competition for ETC stock will start again. In my opinion, this competition for ETC stock could see the SP soar above $1 this calendar year.

Furthermore, ETC is not too far away from the ASX300, and once included, this listing will open up a whole new pool of long term investors (who are presently excluded from investing in ETC) and give the sp further upward momentum. The recent move to an independent chairman will also help in this regard.

The conditions I discussed in a previous post for a substantial ETC price rise are slowly falling into place. What we need now is (i) for ETC to post an FY09 result of approximately $48mill, (ii) for the details of the full year report to be in order, and (iii) for ETC to give a positive outlook.

One final point, given the amount of cash I expect ETC to generate in FY10 and beyond, I'd would be surprised if the company does not indicate its intention to pay a dividend or institute some kind of capital return for FY10. Yes, they are going to need reinvest some of their profits into further developing Nexbis IP, but there should ample funds left over for a dividend/capital return.