Astute observers of corporate events have already noticed the mini-stampede of “position builders” on the Santos share register in preparation for “game-changing” events.
On only four occasions over the past 12 months, turnover in Santos shares on the Australian Stock Exchange has exceeded 10 million in a day – three of those were in the past six trading days.
In fact, over the past six days about 8% of Santos’s issued capital has been exchanged, perhaps by traders swapping shares as the stock has risen from around $11 to Friday’s high (and the 12-month peak of $12.62), a 14.7% gain in the blink of an eye.
But it is equally possible to speculate that an institutional, or hedge-fund buyer, has just taken a sizeable position on the Santos share register.
Watching for declarations of ownership in Santos will be one of the fun games at the ASX this week.
For non-followers of the Santos affair, what’s triggered this burst of trading is a fresh inquiry into whether the company should be liberated from the shackles of ownership restrictions put in place 28 years ago when control of the company was last threatened.
Back then, at a time when Australian states made corporate laws, the South Australian Government locked Santos away from the clutches of the country’s most notorious businessmen, Alan Bond.
The government did this by imposing a limit of 15% on the shares able to be owned by a single entity.
Over time, the share limit handcuffs played a role in destroying the entrepreneurial spirit of what had been a very successful oil and gas explorer. Ownership limits, and a forced domicile in Adelaide at a time when the resources sector was being treated with contempt by the SA Government, saw Santos drift into the status of a semi-government agency.
Re-awakening was tried several times but failed. Even the latest attempt under Ellice-Flint to kick-start enthusiasm inside Santos has enjoyed muted success, such are the problems of shaking off almost three decades of government-induced lethargy.
Now it might be different. The SA Government says it will review the shareholder cap, and the current Premier Mike Rann has embraced the resources sector zealously. His enthusiasm reminds The Slug of the old saying about “the greatest zealots being converts”.
Whatever the reason for the awakening of interest in Santos, the trick now is to deliver on the promise of liberating the company – something which Rann seems keen to do, especially as he is presiding over the re-awakening of his state’s mining sector, particularly the uranium division.
It is the whiff of this possibility which lies behind trading in Santos shares. Hedge funds are particularly keen on situations like that emerging at Santos, and doubtless a few of them are smiling at the profit already made.
Equally doubtless, others will follow as the government review is undertaken later this year.
From where the Slug sits, it looks as if the Santos board has roughly six months to either (a) launch a major corporate expansion move of its own in order to remain an independent oil and gas producer or (b) wait for the inevitable full-blooded raid, which will force substantial change on the company.
Whatever happens, Santos, its patient shareholders and South Australia itself will be the winners because there is so much more to be said for “open door” business, than the closed door which has been the Adelaide’s approach for far too long.
