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07 Jun | Timing of Good News

So often lately it seems any price rise resulting from favourable company regulatory news delivered before the opening of the market is swallowed up by bad macro-economic sentiment by day’s end. Whilst it’s impossible to isolate the effect of the timing of a release on price, a little look at price ranges on those days when news is released can provide some interesting results.

Using Berkeley Mineral Resources – our favourite African mineral processing company – as an example, let’s look at the timing of their past six regulatory announcements since the beginning of April 2012.

Here they are:

1. 3rd April 2012 (8.00 AM) – Govt Approval for Kabwe Site Acquisition
2. 16th April 2012 (8.00 AM) – Kabwe Update
3. 19th April 2012 (8.00 AM) – Chingola Copper Tailings Update
4. 24th April 2012 (8.00 AM) – Warrants Update – Amendment
5. 2nd May 2012 (8.00 AM) – Receipt of Large Scale Mining Licence
6. 1st June 2012 (4.00 PM) – Kabwe Update

Note, all but the most recent RNS on 1st June (6 on the graphic) were delivered at the opening of the market – 8.00 AM – and the BMR share price on all of those days but the most recent, ended the day lower than it began.

The RNS on the 1st June was delivered at 4.00 PM, giving the market time to take Berkeley Mineral Resources share price almost 20% higher in just 30 minutes of trading.

Coincidence? Possibly. Was BMR oversold prior to the release on 1st June? Again, possibly. Was the news on June 1st considered to be good news? Almost certainly. Perhaps the market was ready to bounce anyway and an update was all it needed to pile on almost 20%.

Without offering commentary on whether any of the RNS above would – under normal market conditions – be considered positive or negative in nature, it’s interesting to note that giving the market only thirty minutes to react to news compared to a full eight and a half hours resulted in a rise in price by day’s end. Now it’s hard to predict whether if the news from June 1st had been delivered at market opening whether we’d have seen a decent rise by the close of markets, but it’s interesting to note that almost all of the gains attained in that single half hour period were maintained on 6th June – the following trading day. In fact if you look at the candlestick from June 6th (7 on the graphic) you’ll notice the price climbed to well over 4 pence before closing near the close of the previous trading day – June 1st (6).

I know it’s hard to put any stock in the timing of a release having a huge effect on price but it has been nice to maintain the majority of this most recent rise in the price of Berkeley. Now whether the 4.00 PM release has anything to do with the maintenance of that rise or not is certainly a little food for thought.

Thanks again for dropping by.

Get a clear explanation as to what IR35 is all about from clearskyaccounting.co.uk.

Paul
rsvp@investorsoiree.co.uk