Friday, January 24, 2020

ICON: Watch Out Below!

After my post 2 days ago, ICON rallied to a high of RM0.715 yesterday. Those who made the mistake of overselling after the 50-to-1 share consolidation, were hit with a hefty loss this morning when they had to buyback at RM0.72 to meet the delivery.

If these unfortunate players bought back their oversold position on the same day, their losses would be the difference between the buyback price (possibly, the limit-up price of RM0.415 on 22 Jan) and the price of their initial sale.

However, if they failed to do that on the same day, they would have to face the market buy-in this morning. If they had attempted to limit their losses by hedging themselves yesterday, they are playing a high risk game because the rally on this stock may suddenly stop and the share price may go in the reverse gear.

Bear in mind; prior to the ex-date for the entire exercise, there were 1.177 billion outstanding ICON shares. After the stock went ex for the exercise, the number of outstanding shares has initially dropped to a mere 23.5 million shares.

After the completion and listing of Rights issue shares on 20 Feb, the outstanding shares will jump back to 2.374 billion. Since this additional 2.35 billion shares cost only RM0.10 each, the ongoing play is unsustainable. Amazingly, ICON is now trading at RM0.91 at the time of writing this post.

If you have this stock, you would do what is best for you- sell it off as soon as possible. The trick is how? How to sell a stock when it is going higher and higher?!

[Update]

ICON Rights are traded today. They were traded at RM0.39, which is the limit-down price for the Rights! How did the exchange determine the reference price to be RM0.69? ICON is getting stranger and stranger everyday. 

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