in
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O/S over 2.5billions already
Jail for Carnes this time around?
Well
I heard rumors that Mark had agreed to those that helped financially to become Pink to have the new a)s at 100m shares
Now looks like that he lied again,to them
As he lied to the rest of his shareholders about the no r/s,and yet 1x50 r/s
If this r/s does not work out like the Jackass Newbauer is betting on,only a Class Action should be adopted by us shareholders,and Sue him for all he owns
Enough . lies
Such a nice news,but no one cares
Pinocchio has killed the momentum
Any words from Pinocchio Newbauer
When the R/S will officially happen?
Nothing from mikp in the mail Yet
Interests/HobbyGolf, Computers, Flying
When?
You here all day
Lol
Investment PhilosophyProfitable investments only! :)
30 posts and no shares?
Wow
Investment PhilosophyProfitable investments only! :)
Haha
Sure
Take a rest ,
dbmm is winning
All you bashers are in panic
Haha
I keep telling myself....deep breath....count to ten....try to answer without personal attack...if available, always try to present fact to back up your opinion.
Wow
pleaseee
Stop posting bs
His Large Head is full of BS
Not changed in 20 years
Pinocchio
Form PREM14C - Preliminary information statements relating to merger or acquisition
Source: Edgar (US Regulatory)
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
(Amendment No. 1)
Check the appropriate box:
?
Preliminary Information Statement
?
Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2))
?
Definitive Information Statement
Mike the Pike Productions, Inc.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
?
No Fee Required
?
Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
?
Fee paid previously with preliminary materials:
?
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF THE SECURITIES
ESCHANGE ACT OF 1934 AND REGULATION 14C THEREUNDER
_________________________________________________________
WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY
Mike the Pike Productions, Inc.
20860 N. Tatum Blvd. - Suite 300
Phoenix AZ 85050
NOTICE OF STOCKHOLDER ACTION BY WRITTEN CONSENT
Dear Stockholders:
This Notice and the enclosed Information Statement are being distributed to the holders of record of the common stock of Mike the Pike Productions, Inc., a Wyoming corporation (the “Company,” “we,” “us” or “our”), as of November 2, 2023 (the “Record Date”), as required by Rule 14c-2 promulgated under the Securities Exchange Act of 1934, as amended. The purpose of the enclosed Information Statement is to inform our stockholders that on October 31, 2023, the Board of Directors of the Company (the “Board”) adopted resolutions (i) approving the change of the Company’s state of incorporation from the state of Wyoming to the state of Delaware (the “Reincorporation”); (ii) approving a one for fifty reverse stock-split with the timing of the stock-split to be contingent on further action of the Board of Directors (the” Reverse”); and (iii) approving a change of the Company’s name for “Mike the Pike Productions, Inc. to “Arowana Media Holdings, Inc.” (the “Name Change”). The Reincorporation, the Reverse and the Name Change are collectively referred to as the “Reorganization”. On STET 31, 2023, the holders of an aggregate of 3,175,429 shares of preferred stock adopted resolutions by written consent approving the Reorganization. The enclosed Information Statement shall be considered the notice required under Section 228(e) of the Wyoming Business Corporation Act (“WBCA”).
Under the WBCA, the Reincorporation required the approval of the holders of record of a majority of outstanding shares of common stock. The written consent that we received from our stockholders constitutes the only stockholder approval required to approve the Reorganization under the WBCA, our certificate of incorporation and our bylaws.
Only stockholders of record as of October 2, 2023 will be sent a copy of this Notice and Information Statement.
The Reorganization will become effective as soon as possible, but not sooner than 20 days following the date that this Information Statement is first mailed to our stockholders of record, upon the filing and acceptance of the Agreement and Plan of Merger with the Secretary of State of Delaware and the Secretary of State of Wyoming to the extent required by law. We expect to mail this Information Statement on or about November XX , 2023. The entire cost of mailing this Information Statement will be borne by us.
Under the WBCA, our stockholders are entitled to dissenter’s rights of appraisal in connection with the Reorganization which are described in this Information Statement.
PLEASE NOTE THAT THIS IS NOT A NOTICE OF A MEETING OF STOCKHOLDERS AND NO STOCKHOLDER MEETING WILL BE HELD TO CONSIDER THE MATTERS DESCRIBED HEREIN. THIS INFORMATION STATEMENT IS BEING FURNISHED TO YOU SOLELY FOR THE PURPOSE OF INFORMING STOCKHOLDERS OF THE MATTERS DESCRIBED HEREIN. WE ARE NOT ASKING YOU FOR A CONSENT OR PROXY AND YOU ARE REQUESTED NOT TO SEND US A CONSENT OR PROXY.
By Order of the Board of Directors,
/s/ Mark B. Newbauer
Mark B. Newbauer, Chief Executive Officer
November 1, 2023
MIKE THE PIKE PRODUCTIONS, INC.
INFORMATION STATEMENT
REGARDING ACTION TAKEN BY WRITTEN CONSENT
OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES
OF COMMON STOCK ENTITLED TO VOTE IN LIEU OF A MEETING.
NO VOTE OR OTHER ACTION OF THE COMPANY’S STOCKHOLDERS IS REQUIRED
IN CONNECTION WITH THIS INFORMATION STATEMENT.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY
REORGANIZATION OF THE COMPANY
TO THE STATE OF DELAWARE
FROM THE STATE OF WYOMING
REVERSE STOCK SPLIT
NAME CHANGE
INTRODUCTION
This Information Statement advises the stockholders of Mike the Pike Productions, Inc., a Wyoming corporation (the “Company,” “we,” “us” or “our”), of the approval by the Company’s Board of Directors (the “Board”), and by the holders of a majority of the voting power of the common stock and preferred stock outstanding as of November 2, 2023 (the “Record Date”), of: (i) a change of the Company’s state of incorporation from the state of Wyoming to the state of Delaware (the “Reincorporation”); (ii) a one for fifty reverse stock split (the “Reverse”); and (iii) the change of the name of the Company from Mike the Pike Productions, Inc. to Arowana Media Holdings< Inc. (the “Name Change”) by means of a merger of the Company with and into a wholly-owned subsidiary of the Company, Arowana Media Holdings, Inc., a Delaware corporation (“DelCo”), recently established to affect the Reorganization. The Reincorporation, Reverse and Name Change are hereinafter collectively referred as the “Reorganization”. Assuming the merger, as proposed is affected, the DelCo will survive the merger and issue one share of its common stock for each fifty outstanding shares of the Company’s common stock in connection with the merger with all fractional shares being rounded up to the next whole number. The name of the Delaware corporation, which will be the successor to the Company, will be Arowana Media Holding, Inc.
The Company’s Board may abandon the Reorganization at any time prior to the Effective Time if it determines that the Reorganization is inadvisable for any reason and the Reverse is subject to review by the Financial Industry Regulatory Authority (“FINRA”) and will not be consummated until such review is complete.
AUTHORIZATION BY THE BOARD OF DIRECTORS AND THE STOCKHOLDERS
Under the Wyoming Business Corporation Act (“WBCA”) and the Company’s Bylaws, any action that can be taken at an annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote if the holders of outstanding stock, having not less than the minimum number of votes necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present, consent to such action in writing. Under the WBCA, the merger of a Wyoming corporation with and into an entity organized under the laws of another jurisdiction requires the approval of the holders of a majority of the outstanding securities.
On the Record Date, there were 2,382,642,000 shares of common stock outstanding, with the holders thereof being entitled to cast one vote per share and 3,415,142 shares of preferred stock outstanding with the holders thereof entitled to vote with the common and cast 1,000 votes per share.
Our Board unanimously approved the Reorganization, the Reverse Split and the Name Change as well as the adoption of the Delaware Governing Documents (as defined below) on September 30 , 2023, subject to stockholder approval, and on September 30 , 2023, we received approval of the Reorganization, the Reverse Split and the Name Change from the holders of 95.5% of the combined voting power of the Preferred shares entitled to vote thereon and the 54,316,653 common shares which voted on these matters. .
Accordingly, we have obtained all corporate approval required for the matters set forth herein. We do not require and we are not seeking any further consent to these matters. This Information Statement is furnished solely for the purposes of advising stockholders of the approval of the Reorganization, the Reverse Split and the Name Change and giving stockholders notice thereof, as required by the WBCA and the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
We will, following the expiration of the 20-day period mandated by Rule 14c of the Exchange Act and review by FINRA of the Reverse, complete the Reorganization, Reverse Split and Name Change by filing the Agreement and Plan of Merger with the Delaware Secretary of State and the Articles of Merger with the Wyoming Secretary of State.
1
I
REORGANIZATION OF THE COMPANY
AS A DELAWARE CORPORATION
MECHANICS OF REINCORPORARTION
The Reorganization will be affected by the merger of the Company with and into, a wholly-owned subsidiary of the Company that has been incorporated under the Delaware General Corporation Law (the “DGCL”) for purposes of the Reorganization, pursuant to the terms of an Agreement and Plan of Merger, a copy of which is attached to this Information Statement as Appendix A (the “Plan”). After the Reorganization, the Company will cease to exist and DelCo will be the surviving corporation and will continue to operate the business of the Company as it existed prior to the Reorganization.
The Reorganization will be effective after we file with the Delaware Secretary of State a certificate of merger (the “Certificate Merger”) and file with the Wyoming Secretary of State articles of merger (the “Articles of Merger”) (the “Effective Time”). No action with respect to the Reorganization, including the filing of the Certificate of Merger or the Articles of Merger, will occur less than 20 days after the date this Information Statement is first mailed to or otherwise delivered to our stockholders.
After the Effective Time, DelCo will be governed by the articles of incorporation of DelCo as filed with the Delaware Secretary of State (the “Certificate of Incorporation”) and bylaws that conform to Delaware corporate and other laws (the “Bylaws” and the Certificate of Incorporation and the Bylaws are collectively referred to herein as the “Delaware Governing Documents”). Copies of the Governing Documents (as defined below) are attached to this Information Statement as Appendix B and Appendix C.
Upon the Effective Time, each fifty shares share of Company’s common stock outstanding will automatically be converted into one share of the common stock of DelCo with fractional shares rounded up to the next whole number. In addition, each outstanding warrant to purchase shares of Company common stock will be converted into a warrant to purchase one Fiftieth (0.02) shares of DelCo common stock at the same exercise price with no other changes in the terms and conditions of such warrants. Each outstanding share of Company common stock prior to the Effective Time will be cancelled upon the Effective Time and will thereafter be, by operation of law, a twentieth of a share of DelCo with fractional shares rounded up to the next whole number.
Appraisal and Dissenters’ Rights
Under the WBCA, a properly dissenting shareholder is entitled to receive the appraised value of the shares owned by the shareholder in certain specified situations, including when the corporation votes (i) to sell, lease, or exchange all or substantially all of its property and assets other than in the regular course of the corporation’s business, (ii) to merge or consolidate with another corporation, or (iii) to participate in a share exchange.
The WBCA also provides that, unless otherwise provided in the corporation’s charter, no appraisal rights are available to holders of shares of any class of stock which is either: (a) listed on a national securities exchange or designated as a national market system security on an inter-dealer quotation system by the National Association of Securities Dealers, Inc. or (b) held of record by more than 2,000 shareholders. The above limitations do not apply if the shareholders are required by the terms of the re-incorporation to accept anything other than: (i) shares of stock of the surviving corporation; (ii) shares of stock of another corporation which are or will be so listed on a national securities exchange or designated as a national market system security on an inter-dealer quotation system by Nasdaq or held of record by more than 2,000 shareholders; (iii) cash in lieu of fractional shares of such stock; or (iv) any combination thereof. If any Shareholders properly dissent, the we will seek to establish the fair value of their shares and make an appropriate payment to those shareholders. Management does not believe any such payment would exceed the present market value of approximately $0.004 per share on the record date. The Board reserves the right to abandon the Reorganization if a sufficient number of shares are subject to dissenters’ rights that in the Board’s judgement the required payment to shareholders would be detrimental to the Company’s prospects.
A dissenting shareholder must notify the Company of its exercise of dissenter’s rights, in writing, by sending a communication to the Company’s office at Mike the Pike Productions, Inc., 20860 N. Tatum Blvd. - Suite 300, Phoenix AZ 85050 Attn: Secretary. The communication should state the shareholder’s name, address, number of shares held and that the shareholder is electing dissenter’s rights. All such elections must be received by November , 2023. If the mails are used, certified mail, return receipt requested, is recommended.
REASONS FOR THE REORGANIZATION
The primary reason that our Board approved the Reorganization is to increase the financial community’s acceptance of the Company. Management believes that has a Delaware corporation we may be more attractive to sophisticated investors. However, we have no arrangements for any particular financing and no assurance can be given that any financing will in fact occur. Management is aware that franchise taxes are higher in Delaware than in Wyoming, but through the chosen capital structure of Arowana Media Holdings, Inc. has sought to minimize the impact thereof. If the Reorganization had been affected in calendar 2022, we would have paid $ in franchise taxes to Delaware as opposed to the $50 we paid in Wyoming.
2
EFFECTS ON THE COMPANY
General
The Reorganization will not result in any change in the business, physical location, management, assets, liabilities or net worth of the Company, nor will it result in any change in location of the Company’s current employees, including management. Upon consummation of the Reorganization, the daily business operations of the Company will continue as they are presently conducted at the Company’s principal executive office located at 20860 N. Tatum Blvd. - Suite 300, Phoenix AZ 85050. The consolidated financial condition and results of operations of DelCo immediately after consummation of the Reorganization will be the same as those of the Company immediately prior to the consummation of the Reorganization. In addition, upon the Effective Date, the board of directors of DelCo will consist of those persons elected to the current Board of the Company and the individuals serving as executive officers of the Company
Ty
We suppose receive something in the mail
Nothing sofar
Waste of money!!!
What day the r/s?
Ty
Let's see what comes next!!
And now what?
Mikp
Gm all
Let's see what Mark has decided to do!!!
Mikp
Cornerstone Army is no were to be seen
Or mikp should be 0010 at least
No one is commenting on that
Shows the investors mood since this Jackass CEO announced the nob,RS. And
RS 1x50
Shameless liar
Since I was a little kid,I was taught that lying was wrong and if I did lie there would be some consequences(punishment)
Mark Newbauer parents,looks like that,did a lousy job with him,as
he continue to lie at his 50 plus age
He needs to be punished
Milp
At Subway
Sell the company to a real CEO
Newbauer is not mentally fit here
Mikp
Call Newbauer and his phone message say
Congratulations. You have reached Me the Jackass Mark Newbauer
Trust me
Mark Pinocchio's mouth,was the one stating No R/S
Mark has been a CEO for Ever
He lied before,and he lied again now even after lot of us have given him an other chance to fix his old mistakes
He has proved to the investors that nothing has changed
Liar
Liar
Liar
Mikp
Not sure if is Cornerstone fault
Mark is to blame
He is a Total Jackass
He does not listen but himself
When a team Captain loose his teammate trust,is never a good thing for that team
Mark Newbauer Pinocchio
Has Lost it all!!
Too bad..this time looked like he had a chance to redeem himself from last time mistakes
Mark. Does not Care.
Mikp
12 days left
Will Pinocchio do the right thing?
Most likely not
Because he believes in his expertice
Reversing and kill his investors
What a Clown 🤡
What a disaster
13000 shares
Mark Diluting?
Mikp
Just Mark
He was the one that lied about no r/s
He should be the one,to erase the r/s
He needs to come out,and talk to his shareholders that he made mistake,and reverse his Actions
Mikp
The Company’s Board may abandon the Reorganization at any time prior to the Effective Time if it determines that the Reorganization is inadvisable for any reason and the Reverse is subject to review by the Financial Industry Regulatory Authority (“FINRA”) and will not be consummated until such review is complete.
The shareholders have Spoken
Delete the R/S
Mikp
11m at 0004 ask
Were is your Army?
Mikp
Sad board
All because you
Mark Newbauer Pinocchio
Is This The End Of Naked Short Selling?
By James Stafford - Oct 16, 2023, 6:01 PM CDT
American investors have been taken for a trillion-dollar ride by naked short sellers, in what could turn out to be the biggest financial regulatory scandal in North American history.
While what is now an all-out war on naked short sellers intensifies, there is a new flashpoint on the front line–a potentially devastating ruling targeting those who are alleged to make illegal naked short selling possible: The Facilitators: bankers and brokers.
On September 29, Federal District Court Judge Lorna Schofield of the Southern District of New York issued a ruling that has the potential to significantly disrupt Wall Street compliance, and is a major first step towards protecting retail investors from fraud.
In Harrington Global Opportunity Fund Ltd. v. CIBC World Markets, Inc et.al, Judge Schofield found that broker-dealers may be primarily liable for manipulative trading initiated by their customers because they serve as “gate-keepers” of trading on securities exchanges.
These broker-dealers have a “continuing responsibility to ensure that their customer’s order flow ... is in compliance with all applicable rules, regulations and laws and detect and prevent manipulative or fraudulent trading … under the supervision and control of the firm,” the judge ruled.
The defendants in the case had motioned to dismiss Harrington’s claims of market manipulation and spoofing (when traders place market orders and then cancel them before the order is ever fulfilled, manipulating prices in the meantime). Judge Schofield denied the motion after hearing arguments that broker-dealers are not responsible for “their customers’ trading”.
Instead, the ruling recognizes that not only are broker-dealers the gate-keepers who can enable illegal naked short selling, but they are responsible, and thus liable for their customers’ actions. Schofield described broker-dealers as “reckless in not knowing that the trades being executed at their customers’ direction were manipulative”.
Naked Short Selling: ‘Financial Weapons of Mass Destruction’
Naked shorting creates a dangerous minefield for retail investors. But it’s a minefield that dealer-brokers may now be held liable for thanks to the recent ruling.
Short-selling itself isn’t illegal. In order to legally sell a stock short, traders must first secure a borrow against the shares they intend to sell. Where the September 29 ruling comes into play is at the point of the broker-dealer. Any broker who enters into a stock short on behalf of a trader must have assurances that his client will make a settlement.
As opposed to a “long” sale (where the seller owns the stock), a “short” sale can be either “covered” or “naked”.
If it’s covered, then there is no issue: the short seller has already borrowed or arranged to borrow the shares when the short sale is made.
When things get naked, the regulatory environment becomes riddled with compliance holes. With a naked short, the short seller is selling shares it doesn’t own and has made no arrangements to buy. That means the seller cannot cover or “settle” in this instance. More profoundly, it means they are selling ghost shares that simply do not exist without their further action. The ability to sell an unlimited number of non-existent shares in a publicly-traded company gives a short seller the ultimate power: To destroy and manipulate a company’s share price at will.
This illicit practice artificially dilutes share prices and then companies find themselves in a position where they have to scramble for capital, Bryan Barkley points out in in-depth research published by the Medium.
That scramble then leads to shareholder dilution in more capital raises, in the best cases, and bankruptcy, in the worst cases. If things get to bankruptcy, Barkley writes, then short sellers win big because they no longer need to close out their short positions.
Following the 2008/2009 financial crisis, naked short selling was classified as illegal in the United States, though that labeling has done nothing to thwart this lucrative game.
What makes the September ruling so impactful is this: Without the big banks and financial institutions’ complicity, this highly destructive form of naked short selling could never happen. Instead, they actively facilitate the destruction of shareholder value.
The reason some big banks allow it, despite their sizable compliance departments, appears quite simple: These illegal transactions are highly lucrative. The short-term windfall profits associated with the creation of counterfeit shares are too tempting to resist.
“[...] brokers will place a marker or pledge to deliver the shares on the investors’ accounts, which are made by the seller’s clearing firm”, Barkley explains. “Abusive and unchecked naked shorting can lead to a loss of shareholder rights, including disenfranchisement by overvoting and the resulting throwing out of votes by brokers to conceal the breadth of the naked shorting problem, which could also lead to fraudulent vote results orchestrated by broker-dealers instead of shareholders.”
It often goes well beyond “ghost” shares, too. The most nefarious of short sellers target companies with negative reports–sometimes with legitimate information, and sometimes with falsehoods or half-truths–to drive down share prices with maximum impact, thus ensuring that the companies lose their ability to obtain financing. Once that process is completed, naked shorters then begin to offer those same companies alternative financing (predatory debt), which they have no option but to accept.
When broker-dealers are complicit in this, the system is broken. And complicity takes many forms, including willful booking of client shares as “long” when they are actually “short”.
Gaps in the regulatory environment have continued to fail to subdue these illegal activities.
Keeping the Brokers in Check: A Global Loophole
Even before the 2008/2009 financial crisis, there were measures in place intended to protect retail investors and regulate the activities of brokers with respect to short selling.
The SEC’s Regulation SHO took effect in January 2005 and specifically targeted “persistent failures to deliver and potentially abusive ‘naked’ short selling”. Amendments intended to further strengthen these regulations were added in 2008, and in 2010, the SEC adopted Rule 201, restricting the price at which short sales could be made when a stock was experiencing significant downside pressure.
Additionally, the SEC notes:
Rule 204 requires firms that clear and settle trades to deliver securities to a registered clearing agency for clearance and settlement on a long or short sale in any equity security by the settlement date or to take action to close out failures to deliver by borrowing or purchasing securities of like kind and quantity by no later than the beginning of regular trading hours on the settlement day following the settlement date for short sale fails, or no later than at the beginning of trading hours on the third settlement day following the settlement date for long sale fails, and fails attributable to bona fide market making (“close out date”). If a firm that clears and settles trades has a failure to deliver that is not closed out by the beginning of regular trading hours on the applicable close-out date, the firm has violated Rule 204 and the firm, and any broker-dealer from which it receives trades for clearance and settlement, is subject to the pre-borrow requirement for that security.
Is This The End Of Naked Short Selling?
By James Stafford - Oct 16, 2023, 6:01 PM CDT
American investors have been taken for a trillion-dollar ride by naked short sellers, in what could turn out to be the biggest financial regulatory scandal in North American history.
While what is now an all-out war on naked short sellers intensifies, there is a new flashpoint on the front line–a potentially devastating ruling targeting those who are alleged to make illegal naked short selling possible: The Facilitators: bankers and brokers.
On September 29, Federal District Court Judge Lorna Schofield of the Southern District of New York issued a ruling that has the potential to significantly disrupt Wall Street compliance, and is a major first step towards protecting retail investors from fraud.
In Harrington Global Opportunity Fund Ltd. v. CIBC World Markets, Inc et.al, Judge Schofield found that broker-dealers may be primarily liable for manipulative trading initiated by their customers because they serve as “gate-keepers” of trading on securities exchanges.
These broker-dealers have a “continuing responsibility to ensure that their customer’s order flow ... is in compliance with all applicable rules, regulations and laws and detect and prevent manipulative or fraudulent trading … under the supervision and control of the firm,” the judge ruled.
The defendants in the case had motioned to dismiss Harrington’s claims of market manipulation and spoofing (when traders place market orders and then cancel them before the order is ever fulfilled, manipulating prices in the meantime). Judge Schofield denied the motion after hearing arguments that broker-dealers are not responsible for “their customers’ trading”.
Instead, the ruling recognizes that not only are broker-dealers the gate-keepers who can enable illegal naked short selling, but they are responsible, and thus liable for their customers’ actions. Schofield described broker-dealers as “reckless in not knowing that the trades being executed at their customers’ direction were manipulative”.
Naked Short Selling: ‘Financial Weapons of Mass Destruction’
Naked shorting creates a dangerous minefield for retail investors. But it’s a minefield that dealer-brokers may now be held liable for thanks to the recent ruling.
Short-selling itself isn’t illegal. In order to legally sell a stock short, traders must first secure a borrow against the shares they intend to sell. Where the September 29 ruling comes into play is at the point of the broker-dealer. Any broker who enters into a stock short on behalf of a trader must have assurances that his client will make a settlement.
As opposed to a “long” sale (where the seller owns the stock), a “short” sale can be either “covered” or “naked”.
If it’s covered, then there is no issue: the short seller has already borrowed or arranged to borrow the shares when the short sale is made.
When things get naked, the regulatory environment becomes riddled with compliance holes. With a naked short, the short seller is selling shares it doesn’t own and has made no arrangements to buy. That means the seller cannot cover or “settle” in this instance. More profoundly, it means they are selling ghost shares that simply do not exist without their further action. The ability to sell an unlimited number of non-existent shares in a publicly-traded company gives a short seller the ultimate power: To destroy and manipulate a company’s share price at will.
This illicit practice artificially dilutes share prices and then companies find themselves in a position where they have to scramble for capital, Bryan Barkley points out in in-depth research published by the Medium.
That scramble then leads to shareholder dilution in more capital raises, in the best cases, and bankruptcy, in the worst cases. If things get to bankruptcy, Barkley writes, then short sellers win big because they no longer need to close out their short positions.
Following the 2008/2009 financial crisis, naked short selling was classified as illegal in the United States, though that labeling has done nothing to thwart this lucrative game.
What makes the September ruling so impactful is this: Without the big banks and financial institutions’ complicity, this highly destructive form of naked short selling could never happen. Instead, they actively facilitate the destruction of shareholder value.
The reason some big banks allow it, despite their sizable compliance departments, appears quite simple: These illegal transactions are highly lucrative. The short-term windfall profits associated with the creation of counterfeit shares are too tempting to resist.
“[...] brokers will place a marker or pledge to deliver the shares on the investors’ accounts, which are made by the seller’s clearing firm”, Barkley explains. “Abusive and unchecked naked shorting can lead to a loss of shareholder rights, including disenfranchisement by overvoting and the resulting throwing out of votes by brokers to conceal the breadth of the naked shorting problem, which could also lead to fraudulent vote results orchestrated by broker-dealers instead of shareholders.”
It often goes well beyond “ghost” shares, too. The most nefarious of short sellers target companies with negative reports–sometimes with legitimate information, and sometimes with falsehoods or half-truths–to drive down share prices with maximum impact, thus ensuring that the companies lose their ability to obtain financing. Once that process is completed, naked shorters then begin to offer those same companies alternative financing (predatory debt), which they have no option but to accept.
When broker-dealers are complicit in this, the system is broken. And complicity takes many forms, including willful booking of client shares as “long” when they are actually “short”.
Gaps in the regulatory environment have continued to fail to subdue these illegal activities.
Keeping the Brokers in Check: A Global Loophole
Even before the 2008/2009 financial crisis, there were measures in place intended to protect retail investors and regulate the activities of brokers with respect to short selling.
The SEC’s Regulation SHO took effect in January 2005 and specifically targeted “persistent failures to deliver and potentially abusive ‘naked’ short selling”. Amendments intended to further strengthen these regulations were added in 2008, and in 2010, the SEC adopted Rule 201, restricting the price at which short sales could be made when a stock was experiencing significant downside pressure.
Additionally, the SEC notes:
Rule 204 requires firms that clear and settle trades to deliver securities to a registered clearing agency for clearance and settlement on a long or short sale in any equity security by the settlement date or to take action to close out failures to deliver by borrowing or purchasing securities of like kind and quantity by no later than the beginning of regular trading hours on the settlement day following the settlement date for short sale fails, or no later than at the beginning of trading hours on the third settlement day following the settlement date for long sale fails, and fails attributable to bona fide market making (“close out date”). If a firm that clears and settles trades has a failure to deliver that is not closed out by the beginning of regular trading hours on the applicable close-out date, the firm has violated Rule 204 and the firm, and any broker-dealer from which it receives trades for clearance and settlement, is subject to the pre-borrow requirement for that security.
New CEO Needed here
Everyone should tell Mark to Take a hike
He is Worthless
Mikp
Any idea why?
Lol
Didn't you suppose buy out all 4?