Short interest spike at Genesis Minerals pricks investors’ ears

afr.com:

Genesis Minerals has established its place as the top dog in Western Australia’s gold consolidation, but a recent uptick in its short interest has investors wondering if it’s got another big M&A play afoot or if it’s just nursing a hangover from the recent index inclusion.

Genesis Minerals, led by Raleigh Finlayson, is still the preferred acquirer of St Barbara’s Gwalia mine. Bloomberg

The short interest in Genesis sat at a benign 2.8 per cent on September 14 but within a week had shot up to 9.4 per cent. That’s more than triple the base number.

The first line of enquiry to solve the puzzle has naturally been if Genesis has another big M&A play on the boil that would require it to issue a truckload of new shares.

But Street Talk’s straw poll of investors this week did not turn up talks of a raising in the immediate future. Genesis is M&A-minded – but it’s not days away from a deal and had $156 million cash at June 30.

And so, it’s more likely that Genesis’ induction into the ASX 200 index – announced by S&P on September 1 and effective on September 18 – is contributing to the recent spike. Funds played the index inclusion – the oldest trick in the book – and now the catalyst is out, there’s some betting the stock will return to more normal levels. For this set, which is willing to take the other side of the trade, Genesis’ index inclusion would have expanded the amount of stock available to borrow.

Still, 9.4 per cent is not insignificant, and no doubt investors would be keeping a close eye on the short interest. If it sticks around or climbs up, it should spark a rethink on the fundamentals – akin to Liontown Resources before it turned into an M&A target.

Another key development during the period that Genesis Minerals’