Key Points:
- Tintra has soared 120% this morning on news of a strategic tie-up
- The question is how long before this surge fades – or even will it?
- It’s news like that which moves share prices but how far and for how long?
Tintra PLC (LON: TNT) shares have soared 120% on the exchange this morning on news of a strategic tie-up accompanying a funding round. The full Tintra announcement is here.
Stripped of the detail, the Tintra announcement is that two strategic investors have come on board with a mixture of share and options issuance. The total dilution looks to be about 3% or so, so not hugely material to extant shareholders at Tintra.
This all follows on from the strategic announcements made in November last year concerning the change in direction and business areas of Tintra.
Today’s announcement confirms that those strategic changes really are going to take place. For one of the two strategic investors in this new funding round insists that they do go through. The second, and larger, new investor completing is contingent on Tintra fully divesting itself of the lottery related operations. This is something that has already been announced and is expected to complete this month, before Tintra’s year-end. But now it must complete otherwise that new investment isn’t going to come in – a significant incentive to make sure that it does complete.
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However, what we as traders are interested in is what’s going to happen to the Tintra share price now? This immediate future, well, it could go different ways. One is that the deal is so truly transformative that the Tintra share price continues its climb even after this 120% this morning. Another is that mature consideration of the deal says that yes, it’s all very good and so on but there’s a bit too much initial excitement. So, we might expect a fall back at some point.
It’s even possible to see a little weakness, at pixel time Tintra is a little off the peaks reached earlier in the day.
We can also construct this as being entirely technical rather than full market consideration. The above would be traders like ourselves considering the value of this news. But there’s another way of looking at it too, which is through the market maker lens. When there’s this sort of excitement in a stock then the first thing market makers do is widen the spread – that’s out to 15 pence at present, or near 15% of the Tintra share price. Another common tactic is to pull the share price up ahead of actual activity in it. Market makers see the news, mark up the stock significantly in the face of little trade and then see who bites. As people do or don’t then they adjust the price up or down to reflect actual trades, rather than assumptions about what trades there might be.
A useful assumption about the Tintra share price is that at some point this spike will peak and then recede, at least a bit. Trading positions are to be determined by beliefs about what that spike price will be and how much fade there will be.