Veris Gold/Yukon-Nevada Gold – Stupidity at its Finest

Today was a very interesting day for the shares of Veris Gold, formerly Yukon-Nevada Gold. The stock opened at $2.75 per share, then it just kept getting pounded over and over mainly by the same seller, Instinet Canada Limited, which is seller number 013. You can see the trades when you go to the TSX Exchange and type in the ticker symbol VG.

The seller kept selling and selling, driving the stock price to as low as $2.31 per share. There was really no fundamental reason why anyone would be selling so furiously. There was no bad press release or any other bad news. Actually, yesterday, the company came out with good news announcing that it received approval to increase its roaster throughput to the maximum amount of 6,000 tpd. This, in my view, was very positive.

Then, all of the sudden, the same entity, Instinet Canada Limited, started buying like crazy. At first, I was thinking that this could not have been the same buyer. I thought that maybe this is just a company that was representing another client who chose to buy, but then I received this e-mail.

“I just talked to a trader buddy of mine and we came to the conclusion somebody didn’t realize the stock was consolidated and started selling when they saw the price at $3.00…selling the pre-consolidation amount of stock and then realizing they only had 1/10^th of the stock because of the consolidation…seen some crazy trades in my day but this is one for the memoirs.”

If you do not know the details about Veris Gold, you might not understand what this means. Yukon-Nevada Gold Corporation recently changed its name to Veris Gold. Also, the company consolidated its shares by doing a 10-1 reverse split. Before the consolidation, the stock was trading for $0.30 per share, and after the shares were consolidated, instead of having 10 shares, you had 1 share but now each share was trading for $3 per share. It appears that this seller thought that the price of Veris Gold increased from $0.30 to $3 so they started selling thinking that they just had a ten-bagger. Then, after selling a lot of shares today, he must have realized that he made a big mistake. Consequently, this seller started buying like crazy. As a result of this, he pushed the price from the low of $2.31 per share to $3.30 per share. This is an increase of 43 percent in matter of a few hours. This is what I call stupidity at its finest.

I want to make it clear that I do not have proof that this is why this seller sold and then bought back these shares today, but based on the posted trades, this is what appears to have happened.

Disclosure: Long Veris Gold