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National Bank Of Greece (NBG): Could It Be Subject To A Large-Scale Pump And Dump? Even If Remote … It Is A Possibility.

Dec. 26, 2013 6:49 AM ET1 Comment
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NATIONAL BANK OF GREECE SA ("the Bank" or "NBG") announces that as at 27 June 2013 its 2,274,125,874 new common, registered, voting shares ("New Shares") of a nominal value of EUR 0.30 each. . As of the same date, the new aggregate of NBG shares listed on the ATHEX will be 2,396,785,994 common, registered voting shares of a nominal value of EUR 0.30 each.

As of the same date the trading of 245,779,626 Warrants will commence; the said Warrants will be issued by the HFSF and granted to private investors who participated in the Increase. (10.81% participation from the Private Sector).

Warrants constitute freely transferable securities. Each warrant incorporates its holder's right to purchase from the Hellenic Financial Stability Fund (the "HFSF") 8.22923881005499 New Shares acquired by the HFSF as a result of its participation in the Increase (the "Purchase Right").

The Private Sector (PS) Subscribers received therefore, for each subscribed share, the right to acquire additional 8.223 shares at fixed strike price as described in the table below:

HFSF … has interest in higher prices to be able to get out with a profit from the Greek Mess.

As of today, only 15.37/% of the outstanding shares can be considered as Free Float:

If you remove the 5,50% of Domestic (Greece) retail Investors as well as Domestic Private and Public Sector Companies (Link), which are probably long term investors and will likely be only spectators of any future NBG PPS development (their influence is only minimal from a supply-demand perspective), the true/real free Float is approximately 8% (190m shares) of the Outstanding Shares Balance (OS), At current prices, the effective Free Float is valued at approximately USD 1 billion.

The Total Open Interest in Calls Options from the Period between today and May 17 2013, for strike prices between USD 1.50 and USD 7.00, is for approximately 38.1965m shares (representing more than 20% of the free float).

The Total Open Interest in Calls Options from the Period between today and May 17 2013, for strike prices between USD 1.50 and USD 7.00, is for approximately 86.220m shares (representing more than 45% of the free float).

On average, over the past few months, more than 50% of the Daily Call Options Volume was executed at Ask or above.

As of December 12 2013, the short interest was 12.475m shares, while the Average Daily volume in the U.S. was 2.983m shares.

Adding the 12.475m shares shorted to the 86.220m shares call-optioned, it results that at some points, some 98.695m shares could be required to be delivered (representing more than 52% of the free float). It is a 33x multiple of the average daily traded volume.

Considering that American Options can be exercised at any time, while the Warrants can only be exercised at a pre-determined set of dates (even if you have a Warrant, you could not deliver the underlying. In addition a divergence in prices if markets expect PPS to fall after the squeeze … so that even if the short call is backed by a long warrant could be a problem) … theoretically … by bringing the PPS of ADS at/or above USD 7.00 … and starting to exercise the Calls … … a massive short squeeze could be generated.

I don't think such a scenario is very likely to happen … however it is a possibility! NBG has shown us in the Past … its trading can be quite erratic sometimes.

For sure, I would consider it twice … before Entering a short position.

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