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LDK Solar Co., Ltd. Message Board

thesecondincarnation 3 posts  |  Last Activity: May 21, 2014 1:18 PM Member since: Nov 9, 2013
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    Russell Reconstitution = AVNW Carnage

    by thesecondincarnation May 21, 2014 12:06 PM
    thesecondincarnation thesecondincarnation May 21, 2014 1:18 PM Flag

    1. "Rebalancing never has an effect on the stock price unless it's super thinly traded."

    Google "Price Response to S&P 500 Index Additions and Deletions" and click the first link. If you can make it through that, come back to me and I'll point out data from 2012 and 2013's Russell rebalance.

    2. "The major holders of AVNW stock are not index funds"

    Just the obvious indexing holders as follows:

    Name / Shares owned / % of total shares outstanding / % of float:
    a. Dimensional Fund Advisors LP (EMH / Indexing shop) / 3,506,406 / 5.64% / 5.81%
    b. BlackRock Institutional Trust Company (Pension / iShares) / 3,018,584 / 4.86% / 5.01%
    c. Vanguard Group (self-explanatory) / 1,999,382 / 3.22% / 3.32%
    d. State Street / 1,142,762 / 1.84% / 1.90%
    e. Northern Trust / 801,642 / 1.29% / 1.33%

    Just those known indexers total to 17% of the total float, not to mention the fact that there are likely many other indexers not shown above. I'm not even going to bring up what would happen if the price dropped below $1.00 and the company was delisted by NASDAQ.

  • thesecondincarnation by thesecondincarnation May 21, 2014 12:15 PM Flag

    GMAN is going to get crushed with Russell reconstitution happening in a few weeks. Same thing with GMAN as AVNW - see my post on that stock's message board... yahoo won't let me make a similar post.

  • thesecondincarnation by thesecondincarnation May 21, 2014 12:06 PM Flag

    AVNW is going to get CRUSHED due to the Russell reconstitution in a few weeks. For those of you who don't know, every year Russell Investments resets the population of their indexes. Russell's most well-known index is the Russell 2000, the population of which is (in simplified terms) determined by the following:

    1. Take the 1,000 largest U.S. companies by market cap. These companies make up the Russell 1000 index.
    2. Take the next 2,000 U.S. companies by market cap. These companies make up the Russell 2000.

    As of now, AVNW is in the Russell 2000, which means that every ETF, pension fund, index fund, etc. that wants to own the Russell 2000 also owns AVNW. Based on Bloomberg data, holders of this type make up somewhere between 65% and 78% of the company's TOTAL SHARES OUTSTANDING. Don't believe me? Look at the 'major holders' link for the stock.

    Russell will use market caps as of the close of trading on 5/30 for their reconstitution process. As of now, AVNW does not have sufficient market cap to the cut for continued membership in the R2000 index, nor is it likely to (last year's cutoff was $129 million, this year's will probably be higher given how the indexes have all risen over the last 12 months). This means that, when the index drops AVNW, every index holder I mentioned will be FORCED to SELL all their shares, as owning AVNW would no longer be consistent with owning the R2000. This selling pressure is going to obliterate the stock's price.

    The effect of index rebalancing on share prices is well documented in academia. Sell your shares now to avoid getting destroyed in June.

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