I guess you must have followed the pointer to my calculation in the Guide to Beginners thread by now. I did try to repost it, but it didn't survive the filter. Briefly -
$42,000,000 - estimated total dollar value of the index tracker fund holdings in 2011.
$182,107,500 - free-float-adjusted market cap in 2011.
$403,003,750 - free-float-adjusted market cap in 2013.
$42,000,000 divided by $182,107,500 multiplied by 403,003,750 equals -
$92,945,963 - estimated total dollar value of the index tracker fund holdings in 2013.
Clearly there are likely to be differences between now and then in the combined markets caps of all funds within the index which will throw the calculation out to some degree.
It would be useful if you would post some info supporting your estimate of a weight for INSM of around 3bps.
Fud, are you saying that about 25% shares are usually own by index funds. Looks too high to me, but I do not have any better estimates. Where did you get yout $42mil number from 2011..that will answer that 25% number
On the evening of our 2012 delistment over 7 million shares were traded.
My assumption at the time was that the shares were double-counted - once for the sale from the tracker fund to the agent, and once from the agent to a pre-arranged buyer.
But for all I know something more complex than that may have occurred.
Probably worth making the point here that over the course of the next two weeks or so the float will be effectively be REDUCED by however many shares are required for the tracker funds.
Anybody selling shares cannot expect to be able to buy them back in a few weeks. They will either have to extract them from a much smaller float - perhaps as small as a few million shares, unless the prearranged tracker fund purchase price is a lot higher than the current price - or hope to grab some via the next share offer, which one assumes will occur around the end of this year as the Company gets closer to breaking into the cash raised via the offer late last year.
Barring some sort of future catastrophe it's likely to be a very long time before the shares sold this month will once again see the light of day.
Re your -
"this is just an ignorant post the funds buying will have minimal effect on the stock"
- I appreciate the correction. Nobody wants ignorant posts in this forum.
Do you have any reason to believe that the tracker funds will need to acquire less than $90 million worth of INSM shares by the end of this month?
If not - your expectation that the funds will acquire their shares for not much more than $13 a share suggests you expect the float to be reduced by around 7 million shares over the next two weeks or so.
Here's the current breakdown of the float -
Approximately 9 million shares with retail investors.
Approximately 21 million unrestricted shares with institutional investors.
How are you expecting the float to look after 7 million shares have been taken out?
p.s. If you're expecting any of the last-reported Short position of almost 2 million shares to be covered during that period by all means factor that in.
Btw - that doesn't include whatever proportion of the last-reported Short position of two million shares is covered during that period.
If the prearranged purchase price for the tracker funds is $15 - and if the entire Short position is covered - a dollar value of $90 million would require 8 million shares to be purchased by June 28.
I personally believe far fewer shares will be needed, because the prearranged purchase price is likely to be far higher than $15.
Happily for the rest of us, you don't have several million shares to sell.
Doubtless you are correct in predicting that a few retail investors will choose to bank a double or treble over their purchase price. But the serious investors (shareholders or Shorts) who will need to supply the bulk of those millions of shares over the next two weeks will not be valuing the shares on the basis of historic share price. They'll be using valuation models based upon revenue projections - applying discounts to factor in the uncertainties.
The mistake you're making is one which will have haunted numerous HGSI investors. Had they also had a 10:1 reverse split, the low point in March 2009 would have seen a share price of $4.50 (it was actually 45 cents, and the market cap was in a similar range to ours at that point).
There was no Russell 3000 entry for them that year. After encouraging Phase III results (the first of two ongoing studies) arrived in July the share price was seven times the March low. The high point in December that year was seventy times the March low.
And the Phase III results really weren't all that great. Even I could see that at the time. The FDA actually responded to the New Drug Application supported by those results with a Complete Response Letter. From memory the drug wasn't approved for another couple of years.
I keep hearing that argument. But how can you defend it?
Who in their right mind is going to sell several million shares in June without having one eye on their likely value just weeks later should the Phase III results be strong?
If the seller thinks his shares are likely to be worth more than $50 with strong Phase III results he isn't going to sell for $20 now.
It did amuse me when Terry reposted Hubby's comment about professional investors not giving money away.
A completely valid point - which neither of the two of them was capable of applying correctly to the current position.