Views on Carillion [CLLN] ?

[moorfield]

Can a 'shorted' stock be undated or does there have to be a date that the shorting comes to an end.

Both, depending on implementation. "Shorting" stock can be done using futures or options contracts which have fixed expiry dates, but are commonly "rolled" onto a subsequent expiry date. Or using stock lending/repurchase agreements (repos) which can be undated if counterparties agree. (I think it can also be done using swaps but the mechanics are beyond me...)

Carillion issued a convertible bond a couple of years ago maturing in 2019. I suspect that date has something to do with the shorting going on, but I can't fathom what...

[Wizard]

Can a 'shorted' stock be undated or does there have to be a date that the shorting comes to an end.

Both, depending on implementation. "Shorting" stock can be done using futures or options contracts which have fixed expiry dates, but are commonly "rolled" onto a subsequent expiry date. Or using stock lending/repurchase agreements (repos) which can be undated if counterparties agree. (I think it can also be done using swaps but the mechanics are beyond me...)

Carillion issued a convertible bond a couple of years ago maturing in 2019. I suspect that date has something to do with the shorting going on, but I can't fathom what...

It would presumably be great if that were the driver of the shorting as it means there is no fundamental business issue behind the shorting. Ever hopeful

Terry

[JMN2]

Just imagine the potential rally on the stock when the shorts scramble to cover their positions.

[Clitheroekid]

Just imagine the potential rally on the stock when the shorts scramble to cover their positions.

I think that's what is sometimes called wishful thinking!

Unfortunately, there is still a lot of insider trading in the City, and the fact that CLLN is being so heavily and consistently shorted is a strong indication to me that there is an unpleasant but so far undisclosed problem that may (or may not) be revealed on Tuesday.

However, on what is publicly known about the company it looks to be great value at its present price and I'm very tempted to have a punt on Monday in the hope of being proved wrong!

[NeilW]

The price fall has put Carillion capitalisation below £1bn.

So it's dropped out of the selection sieve and I can stop worrying about it

[moorfield]

The price fall has put Carillion capitalisation below £1bn.

So it's dropped out of the selection sieve and I can stop worrying about it

It dropped out of The Sunday Times "Top 200" Companies (my own hunting pool for new candidates) many months ago. On that basis it wouldn't figure on a new candidate shortlist now, however having already purchased years ago I'm committed and comfortable with topping up as/when appropriate.

Roll on Tuesday ....

[Wizard]

The price fall has put Carillion capitalisation below £1bn.

So it's dropped out of the selection sieve and I can stop worrying about it

It dropped out of The Sunday Times "Top 200" Companies (my own hunting pool for new candidates) many months ago. On that basis it wouldn't figure on a new candidate shortlist now, however having already purchased years ago I'm committed and comfortable with topping up as/when appropriate.

Roll on Tuesday ....

Yes, one way or another I would like some sense as to where this one is going.

Terry.

[monabri]

I can see a divi cut based on a slowing in the construction sector - thus reduced profits. they still have the pension tombstone (£50M+) to find and then the divi on top.

[wanderer101]

The update has come early, and it is not good: dividends suspended and it sounds like a rights issue in the offing.
I was tempted by the yield but held off pulling the trigger, thanks partly to the differing views expressed on this board.
So thank you for the discussion.
Commiserations to holders
wand

https://www.investegate.co.uk/carillion ... 00105229K/

Extracts:
H1 operating profit lower than expectations primarily due to phasing of Public Private Partnerships (PPP) equity disposals, which are now expected to be in H2.

Deterioration in cash flows on a select number of construction contracts led the Board to undertake an enhanced review of all of the Group's material contracts, with the support of KPMG and its contracts specialists, as part of the new Group Finance Director's wider balance sheet review.

· This review has resulted in an expected contract provision of £845m at 30 June 2017, of which £375m relates to the UK (majority three PPP projects) and £470m to overseas markets, the majority of which relates to exiting markets in the Middle East and Canada. The associated future net cash outflows in respect of these contracts is £100m-£150m (primarily in 2017 and 2018).

· s a result of the enhanced contracts review and the strategic actions below, reflecting difficult markets and exits from certain territories, Carillion is issuing revised full-year guidance, with revenue now expected to be between £4.8bn and £5.0bn and overall performance expected to be below management's previous expectations.

Actions to reduce net borrowing

· Deterioration in cash flows on construction contracts, combined with a working capital outflow due to a higher than normal number of construction contracts completing and not being replaced by new contract starts, means H1 average net borrowing is now expected to be £695m (Full year: 2016: £586.5m).

· The actions the Board put in place in March 2017 to reduce net borrowing have been accelerated and further actions are being taken to reduce net borrowing including:

· 2017 dividends suspended resulting in a cash saving of approximately £80m.


Strategic and operational review

· The Board announces today that it is undertaking a comprehensive review of the business and the capital structure, with all options to optimise value for the benefit of shareholders under consideration. An update on the Board's review of the business and capital structure will be provided at the Group's interim results, in September.

[mike]

It seems there was no trading in CLLN shares for the first few minutes (suspended?), and they opened around 120, down 37%. Ouch !

[OZYU]

Yuk!

Those shorters will make a few bob today.

1.58% of our HY effort, so not too much damage. Will hold off selling for a few months as the dust often settles a bit by then. But unlikely to stay in the portfolio long term.

Ozyu

[Raptor]

Well at least that has balanced my dividend income. CLLN was over 10% before? Oh well, tick the box and move on.

Raptor.

[moorfield]

The update has come early, and it is not good: dividends suspended and it sounds like a rights issue in the offing.
I was tempted by the yield but held off pulling the trigger, thanks partly to the differing views expressed on this board.
So thank you for the discussion.
Commiserations to holders
wand

I had considered this outcome earlier up the thread (June 29th, 2017, 1:33 pm):
viewtopic.php?f=15&t=2950&start=300#p63666

Three immediate reactions

(i) No need to panic sell, my own HYP's overall income should achieve its target this year,
although that will need another top up elsewhere.

(ii) Suspension of any further top-ups/rights issues now until at least the following financial year's results are reported (March 2019).

(iii) With that price drop today, the shorters' work is done ...

The need to sell from my own HYP may manifest itself in mid/late 2018 if next year's income target looks to be falling short. Where the share price may be by then is anyone's guess.

M

[Bouleversee]

Another of my posts disappeared; try again: s.p. down 30.07% today. That seems rather overdone in view of the fact that it had already come down so much. However, I can't say I feel tempted to top up or subscribe to a rights issue if there is one. Is this the first profits warning they have issued? Seems a bit late in the day.