Being dropped from coming last in the ASX 200 to the top 10 or 20 number in the ASX 300 is about as relevant as America or France losing their triple AAA ratings or as relevant as Aussie banks losing a notch or WPLs credit rating being downgraded by S&P. All proved immaterial in the end. Stock-markets have kept moving up & up & up. Imagine your favourite footy team coming last all the time, being dropped a division and is now in the top few teams in that division.
What's more it can also have an adverse effect especially if the company had been strongly short-sold prior to its exit from the index (which it was). Some of those 'short' positions will have to be closed as they were/are conducted on borrowed funds from banks that only approve funds for short positions on stocks listed in the S&P/ASX 200. It could thus stem the flow of money available to borrow on and short sell the stock. Works both ways.
Now, there has been a lot more selling than buying on KZL the last 5 months, so I don't think they could suffer any further from 'less' selling. Many funds were certainly not buying anyway. Just De Bortoli Wines en masse. KZL was also dropped a long time ago by the banks and most margin lending facilities unless it was part of diversified portfolio and even then they would only lend 40%.
The effect may be more psychological than actual. Circa 80 million dollars cash in the bank tends to make one feel good though.
At the end of the day, Incite is right. It will all come down to how much they get for LL and I agree, 90 million looks more on target given they had already invested 60 million and had 3 potential suitors as of 4 weeks ago moving to round 2 (excluding WSA). Now WSA would have had to have offered more than 60 million and more than the other 3 suitors. However, they could have all offered low-ball figures. Who knows. With Nickel prices up 25-30% at the time, KZLs bargaining positioned clearly improved during peak negotiations.
What's also clear, is that for someone who wasn't interested (WSA) that suddenly became 'interested' it seems more likely that they outbid other suitors at the finish line.
What we should be asking ourselves is how much could WSA have afforded to pay? What is their cash position? Therein lies the answer.
KZL Price at posting:
31.0¢ Sentiment: Buy Disclosure: Held
