Noble shares fall for second day ahead of rights shares listing
Shares in Noble Group continued to fall on Wednesday in
heavy trading as investors sold the rights shares ahead of their listing on
Thursday and as more traders jumped on the selling bandwagon amid the plunge.
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Andrea Soh
04 August 2016
Shares in Noble Group continued to fall on Wednesday in heavy trading as investors sold the rights shares ahead of their listing on Thursday and as more traders jumped on the selling bandwagon amid the plunge.
The counter tumbled as much as 12.2 per cent to 12.2 Singapore cents in the morning before ending the day off the lows at 13.2 cents, down 0.7 per cent. The stock has lost 18.5 per cent in value in just two days.
Noble was the most actively traded for the day with 319.4 million shares worth S$41.1 million changing hands. This was nearly four times the average three-month volume of 86.6 million shares.
The group said on Tuesday, in response to a Singapore Exchange query, that it was unaware of any reason for the unusual price movements.
Market participants, however, pointed to the listing of its new rights shares on Thursday as the main reason. Noble said on Wednesday that it issued almost 6.535 billion rights shares.
The commodities group had on June 3 announced its US$500 million one-for-one rights issue, with the new shares priced at 11 Singapore cents apiece- representing a discount of over 60 per cent to its last closing price of 30 cents before the announcement.
The cash call was expected to raise nearly S$700 million in net proceeds, with the bulk going towards working capital and general corporate purposes, and a fifth towards repaying debt.
Some dealers reckoned that with the doubling of its issued shares to 13.07 billion, shortsellers still harbouring doubts over Noble's fundamentals could have cashed in on the poor market sentiment.
"This selling is due to its rights issue which would be credited into the account by Thursday," said a dealer.
This, in turn, probably attracted other traders to the stock. "It's easily a target for scalpers to short it," said a trader.
That Noble's founder Richard Elman sold off a portion of his rights entitlement earlier also did not lend confidence to the market, he said.
From a technical trading perspective, Noble on Tuesday fell through a key support level of 15 Singapore cents - a previous low that it had bounced off a few times before.
"But (the floor) just broke decisively in huge volumes," said the trader. This added to the stock's downward momentum on Wednesday, as the market digested the news and saw more downside to the stock with the new rights shares, he said.
The "forceful" fall suggested further downside, said PhillipCapital analyst Jeremy Ng in a note on Wednesday. "Expect (the) price to fall further to test the 0.100 psychological round number next, followed by 0.096."
Nevertheless, some believe that the stock might have reached a low for now and would rebound as short positions are covered.
"With such a big move, close to 20 per cent in two days, people will look to cover (their positions)," said the trader. "Tomorrow, if there's any spike, it will be due to short-covering rather than fundamental reasons."
The fundamentals of the company remain weak, said Maybank Kim Eng in a note. Noble's sale of its prized energy business Noble Americas Energy Solutions has triggered questions on its future, it said, given that the cash-generating unit had previously been touted by former CEO Yusuf Alireza as a core asset to help turn around the group's flagging commodity business.