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A couple of weeks ago I wrote about some odd happenings around the gigantic short position on Top Glove's stock. You can read the full post here. A reminder in case you do not want to read the whole article - the two things that happened at that time were:

- Datuk Muhamad Umar Swift, the CEO of Bursa Malaysia Berhad said that the net short position limit on any stock on Bursa is 3%. The official information says 4%, and it was later confirmed by Bursa that it was indeed 4%.

- Bursa released the daily net short position data, excluding data for Top Glove. An updated file was uploaded several hours later.

Both of these odd events happened on February 2, coinciding with the time when there was by far the most interest in how the short position was moving. Since then Bursa stopped releasing the daily net short position data files around midnight on the same day, and began releasing them the next morning, before opening of trade.

Today another rather puzzling event took place. According to Bursa's net short position report for 11 February (see here), the net short position on Top Glove's stock decreased by 27.6 million shares from what it should have been. In other words, the short seller had supposedly bought back 27.6 million shares. As mentioned before (see here), this net short position data comes 1 day late, i.e. the report dated February 11 actually shows the position as it stood at closing of trade on February 10. Thus, this covering of short positions (buying back of shares) has taken place on February 10. Additionally, we know that on February 10, Top Glove bought back 600,700 of its own shares (source). The total transaction volume from these two transactions alone is therefore 28,200,700 shares.

It may then come as a surprise that the total daily volume on February 10 was only 20,317,300. The only way this discrepancy could be explained is with the transaction having taken place over the counter. The short seller has found a willing counterparty that would sell their shares to the short seller at an undisclosed price in an off-market direct transaction. And since it's an over-the-counter transaction, it would technically not affect the market price of the shares.

This is not the first time the short seller has done over-the-counter transactions in order to avoid disturbing the market price of the shares. On January 21 and January 22, the short seller returned previously borrowed shares to EPF (see here). However, these shares were not bought via open market transactions, so they were either borrowed shares, or shares bought in off-market (over-the-counter) transactions.

The short positions opened on Top Glove's stock since January 4 reached a total value of RM1.5 billion on Wednesday (February 10). This represents 51% of the entire value of all short positions opened throughout this period on the stock of any company listed on Bursa Malaysia. At the closing market price from Thursday (February 11), the short seller's mark-to-market loss on the Top Glove short position alone exceeds RM100 million (not counting any closing of short positions as we do not know the price at which they have been closed; additionally not counting any borrowing fees, transaction fees, brokerage fees, operational costs, etc, as we do not have information on those).

Important disclaimer: Any views expressed are for informational and discussion purposes only. None of this information is intended as, and must not be understood as, a source of advice. It is imperative that you always do your own research and that you make any decisions based on your personal situation and your own personal understanding.


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