YRC Worldwide Inc (YRCW)

[GuyBig]

Maybe Shorts will Short some more, Not Cover

I wish topdowg11 to be right about a short covering rally coming soon. (I am long 12,000 shares that have a basis well above 26 because of wash sale rules.) Most of the time, big short sellers come out ahead, not behind. What separates big short sellers from individual investors, even more than knowledge and skill, is big money. Big short sellers usually have enough capital behind them to sustain a position that goes against them.

Well capitalized short sellers usually handle a position that has turned against them by ADDING to their short, not covering their short, especially when the short position has been established on the basis of irrefutable logic; like a turnaround situation that will be more than TRIPLING the shares outstanding. If everything else stays the same, when a firm triples its shares outstanding, the price falls by two-thirds, 2/3, so short sellers reasonably expect that YRCW can fall back down to trading between 7 and 8, and surely trading back to the gap between 15 and 15 that occurred in mid-December and in mid-January. They are looking to make about 20 points on the downside and foresee losing at most 10 points on the upside if YRCW goes up to the July 2013 high of 36.99. Odds are 2 to 1 in their favor, as they see it.

On Friday, February 28, the 767,000 shares that traded between 3:59 and 4:00 and the 533,000 shares that traded in extended hours at 4:17 may have been short sellers ADDING to their position, NOT SHORT SELLERS COVERING their position. We do not know. What we do know is if it was shorts shorting more shares, those shares will have to be bought back, and we hope they will be bought back at prices much higher than $26 a share.