To The Moon

Since mid-March, Sats' shares have been rebounding. It closed Monday (Apr 3) at $2.78, representing a 16.8 per cent gain from its Mar 14 close

SATS has had a turbulent six months. After announcing it was in talks to buy the world&rsquo s largest air cargo handler Worldwide Flight Services (WFS), the company&rsquo s shares fell from S$4.09 to a low of S$2.38.

Since mid-March, however, the stock has been rebounding. It closed Monday (Apr 3) at S$2.78, representing a 16.8 per cent gain from its Mar 14 close.

Sats&rsquo rights shares, issued to raise money for the acquisition, commenced trading on Mar 29. And the company announced on Apr 3 that it had completed the acquisition.

With the overhang of the rights issue and the deal completion removed, it appears investors are expecting better days for the stock.

Recent headwinds

Short-selling of Sats had been heavy since the start of this year, according to analyst Brian Freitas of Periscope Analytics, who publishes on Smartkarma, with short-selling crossing 40 per cent of traded volumes in the week ending Feb 17.

Downward pressures continued after Sats announced it would issue 363.1 million new shares at S$2.20 apiece to raise S$798.8 million.

Shareholders were entitled to 323 rights shares for every 1,000 shares held.

The rights issue price of S$2.20 apiece represented a 20 per cent discount to Sats&rsquo last transacted price of S$2.75 on Feb 20, and a 16 per cent discount to its theoretical ex-rights price of S$2.62 per share.

Trading of the rights between Mar 7 and Mar 15 also contributed to the depressed share price. According to Shareinvestor data, the rights were trading as low as S$0.166 on Mar 14. This would have weighed on Sats&rsquo shares, as investors had the cheaper option of buying the rights instead of the stock.