What happened? The share price of Santos Ltd (ASX: STO) finally soared to life in mid-October after plunging to a 10-year low below $4 per share early in the month. Recent purchasers are sitting pretty with the share price sitting at $6.34, but the question remains, can the surge continue?
Well? Santos' share price surge has been primarily a response to the takeover bid from Scepter Partners lobbed on October 22 at a 15% premium to the share price at the time.
The $6.88 per share offer was quickly rejected by Santos' board when it described the bid as "an indicative, highly conditional and non-binding proposal". It was considered to be quite opportunistic seeing as it was at a 46% discount to the share price just one year earlier.
Over the period the WTI oil price has fallen heavily, while the share prices of rivals Oil Search Limited (ASX: OSH) and Woodside Petroleum Limited (ASX: WPL) are lagging behind the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
Now What? The offer and share price spike came at a time when short positions in Santos were steadily rising, implying that gamblers thought the share price had further to fall. Short positions in Santos shares were edging towards 11% of the company's market cap, but have since fallen back towards 8% as the share price bounced and those gamblers were probably forced to exit at a loss.
The fall in short positions indicates that another big rally is unlikely in the short term, unless another suitor comes on board or Scepter Partners significantly improves its offer.
