Definition of troubling: BCE's downside volume
BCE Takeover Part 25
When big cap stocks drop on no news, it’s something you notice. When it happens to the biggest M&A deal in Canadian history, you pay attention.
Over the past three months, BCE (BCE-TSX) shares are down about $1.65 to $38.90. There has been some material news, of course: the CRTC will be doing a full review of the OTPPB acquisition, and the federal government is doing all it can to make it easier for Videotron and Manitoba Tel to get into the cell phone game. Parsing the topics, I can’t see why the shares are down materially as a result of the CRTC delays, as the dividend and the promised $42.75/share bid were thought to be excellent safety nets on the stock.
The wireless competition news has trashed my shares of Rogers Communications (see post “Did the feds just hand Teachers a MAC on BCE?“, November 30-07), but, again, if you believe the $42.75 bid is happening, why worry? Isn’t that Teachers’ problem?
But there it is, the real question. The elephant in the room: IF YOU BELIEVE IT IS HAPPENING.
Most days I am pretty confident that it is, at the original price. But then I look at individual events, particularly the credit markets, currency moves (“BCE Takeover part 23“, November 7-07) and regulatory change, and I challenge that assumption.
And the trading pattern is changing, as well. 9.5 million shares traded on December 5th, and 10.9 million on November 29th — all told, four of the past eleven trading days have seen volumes exceed 5 million shares. Only two days in the prior month broke 5 million.
Pay attention to the trading volumes. They are telling us something.
What it means can be summarized in four buckets. There 1) are hedgies who need their capital for other plays, 2) are long standing institutional shareholders and can no longer be bothered to wait around for the $42.75, 3) are people might be getting nervous about the $42.75 ever coming to pass, or 4) are folks who are looking at the calendar and have concluded they’d rather book the capital gain now, even though they could have sold the very same shares for more than $41 in July and again in October.
Odd, that choice. If you were confident in October that you’d ultimately get $42.75 and didn’t sell for north of $41 at the time, why settle for less than $39 today? If some smart PMs are nervous, should the rest of us be worried as well?
(disclosure – I own BCE)