Sasol stock up 9.5% since morning

[Kingsimz]

Some of you may be thinking to yourselves 'Nature Boy, why is the stock price going up if they just wrote down billions of Rand's of assets? Surely the company is less valuable now?'

Now I'm not Ric Flair, but I can respond to that. This is an indication that most investors in the market already knew that these assets werent as valuable as the accounting indicated, but they didn't know how much less valuable they were. So because of that uncertainty, investors were cautious and the share price was negatively impacted.

Now that the company has come out and given the exact numbers, there's no more uncertainty. For some investors, the impairments could be less than expected and that's good news. For other investors, it could be more than expected but now at least they've taken the pain today and don't have to take additional impairment in the future.

It's hard to predict these things ahead of time, unless you follow broker and investor reports that gauge investor opinion on things like impairments -bankerX

 

[Kingsimz]

Nature Boy, Ric Flair - the theory the market has "priced it in" makes the most sense especially on the institutional side where certainty is almost always rewarded.... but.... indulge me in a small time conspiracy theory (which we have seen many times before). Sasol annual earnings are out on 17th August. What if we're looking at a classic case of build up the rally to short. Get the next wave of retail investors excited, quietly load up on shorts (since prime brokerage will be much cheaper ++ greater availability during the rally).... run a short on Friday afternoon, cover your position on Monday AM (post-earnings), close out with a nice profit.

 

[Kingsimz]

The counter-argument is "well, there's earnings guidance so surely there won't be any massive shocks..." Which is true... although we both know once you get to pop the hood on the AFS, it's the movements behind the headline numbers that guys take a few hours to digest when the brokers issue their notes.