I thought about naming this post "PM anxiety attack "
Updated: Feb 8, 2021 with new info.
Our role is to help investors better understand their risks and rewards from investing in the stock market. We also make proprietary investments.
So, last night I was relaxing and thinking about how $SMLP went up all day. Good feelings, posted a few tweets like this one, here. I was worried that the shorts will start coming out due to the recent stock rise in $SMLP, and confirmed that there are 400k shares available to borrow and short.
Well, I went to bed early after playing Pokemon (that is Oshawat visiting Sophia).
I woke up this morning and boom. $SMLP is down $4.50 a share overnight, from $20.50 to $16.00. My heart raced and I thought...It's ok, stay calm. Let's put in a buy order at market open...maybe it will hit $15.00 and I will buy more. I thought about a March vacation in the mountains...maybe watch a movie tonight.
Then, after coffee, checked social media, thought about quantum computing, wrote up today's to-do list, and even checked the NASDAQ volatility halts (there were 14 today). At 8:56 am CT (26 minutes into the trading day), I checked in on the stock. The stock was back where it was yesterday at close, and it was like after hours (AH) never happened. It was down $0.03.
OK, so what happened in after hours trading? Why would the stock drop 22% overnight. This same type of thing happened a few weeks ago when the stock was up ~70% AH. I have a few guesses:
1. The Yahoo Finance community for SMLP had a few ideas, here. They see it as someone selling 1 share at a time at progressively lower prices. Maybe the occasional 100 share sale to really move the price. Why do this? It creates a stock price 'mark' at the new lower level. It moves the goal posts for the stock from $20.50 to $16.00 in people's heads, even if subconsciously. One poster thought it was a sign that the short sellers were having a bad day.
2. There was a new SEC filing (might be 2 of them, but I only see 1), giving updates to prospectus documents, and publishing the formal details of their funding for the Double E non-recourse debt for $175M, to be backed by $15M line of credit against their existing lines. In Stocktwits, one poster suggested here that this was a sign that Summit Midstream was going to issue a new secured debt offering (maybe $400M), and others cried out "HY" for a new high yield offering. This could be positive if it pushed out maturities, lowered interest rates, and/or retired existing debt below par.
3. It was all fun and games. Say it took (legally) a buyer and a seller to trade 500 shares over the course of the night. At first, the seller loses say $0.10 a share, the $0.20, and so on until losing $4.50 per share by the end of the game. On average, they lose $2.25 per share on 500 shares, or $1,175. Maybe they made a bet with a friend, for $2,000, that they could drive the price down to $16. Maybe they want to buy shares, and feel mad they missed the $15 price last week? Or finally, maybe they are working on behalf of those who profit from a volatile stock price (e.g., swing traders), who stand to make much more than $1,175 on a good day of trading.
Feb 8, 2021 Update: Today I checked the pre-market pricing through Vanguard. The bid was 16.50, the ask 20.48. So, any investor with an appetite for change just has to buy a few shares pre-market. We believe that when the market opens at 9:30:00 ET...the liquidity returns and the pricing goes 'back to normal.'
In addition, short shares available for SMLP remain at 400,000, with a fee reduction from 10% to 9.3%. Not sure exactly what this means...but likely it means that no significant shorts were entered in the past week of trading, and that holdings are settling down.
Finally, here is a link to "Sammie" and "Tom" on Yahoo Finance Conversations about SMLP. They mentioned our YouTube video for this week.
In conclusion, I learned 3 things:
1. I have a strong level of conviction about holding this stock. I saw a 21.95% drop as a buying opportunity. Having conviction, backed by fundamental analysis and research, keeps the anxiety in check and allows for sustainable investing.
2. Being in a stock that is low capitalization, trades with low volume, and seems to have very few eyes upon it, seen here, can be moved significantly overnight. It snaps back when the market opens, but the subconscious price impression is made.
3. When you see people buying or selling (1,10) shares of stock at a time, it is often to move a stock. The math is clear...if you own $1M shares of a stock, and it costs you $1 to move the stock $0.01, you just made $9,999 in in unrealized gains on your investment. This logic is why I started following social media for the stocks I invest in...that same logic works for a small investor that only holds $10,000 shares and seems like a sure thing.
And finally, market manipulation is wrong and I believe illegal. If there are people buying and selling to themselves just to move the prices, or two parties colluding to move a price (say they traded last night, then transferred the 'lost' $1,175 to the other person), then they should listen to the Baretta theme song, here.
Thanks for reading. If you find value, please share the blog post on social media. Our core business is helping institutions or investors through our services.
Strategic IT Management Consultant with a strong interest in Quantum Computing. Consulting for 29 years and this looks as interesting as cloud computing was in 2010.