Where did I say it couldnt be shorted? I didnt say that, it can be shorted but that is not very easy. YIPI isnt marginable due to Reg T requirements for OTC securities.
So how does one short an OTC security? First there have to be shares available to borrow. The shares to borrow are from Block Position holders or even Insiders who allow a broker to borrow against their position, they get a percentage of interest for doing so. As of this morning there are currently 10,000 shares to borrow.
So lets say you want to short YIPI, and you are going to short that 10,000 shares @ .35, first thing is you have to have a margin account. But even that doesnt allow you to short an OTC security, as YIPI is not marginable. Your account would have to be seasoned with trades that are currently being held with unrealized gains, those unrealized gains if they were purchased on margin create what is called "Margin Buying Power". One can use that margin buying power to buy more stock and even short OTC securities.
Now you might be thinking well great I have $3500 in margin buying power so I am going to short YIPI for 10,000 shares.. well not so fast. FINRA requires that you have $2.50 in Maintenance Margin on hand for each share of YIPI you short. So $25,000 must be on hand or in equities in order to take a short position.
(c) Maintenance Margin
The margin which must be maintained in all accounts of customers, except as set forth in paragraph (e), (f) or (g) and for cash accounts subject to other provisions of this Rule, shall be as follows: (1) 25 percent of the current market value of all margin securities, as defined in Section 220.2 of Regulation T, except for security futures contracts, "long" in the account. (2) $2.50 per share or 100 percent of the current market value, whichever amount is greater, of each stock "short" in the account selling at less than $5.00 per share; plus (3) $5.00 per share or 30 percent of the current market value, whichever amount is greater, of each stock "short" in the account selling at $5.00 per share or above; plus (4) 5 percent of the principal amount or 30 percent of the current market value, whichever amount is greater, of each bond "short" in the account. (5) The minimum maintenance margin levels for security futures contracts, "long" and "short", shall be 20 percent of the current market value of such contract. (See paragraph (f)(10) of this Rule for other provisions pertaining to security futures contracts.) (6) 100 percent of the current market value for each non-margin eligible equity security held "long" in the account.
So lets say you got your $3500 in margin buying power the $25,000 in equity to go short, that still doesnt get you to short YIPI. There are additional margin requirements by each broker, I can tell you that one of the more utilized US brokers has what is called a "supplemental margin" requirement of 102% (at a minimum, varies as to the security) of the principal value must also be provided up front. So $32,000 is tied up to short 10,000 shares, which for an OTC security isnt all that bad, but the maximum gain to be realized before interest and fees is $3500.
Interest rates vary depending on demand of the security to be short, in some cases like one over the summer it can run as high as 600%. Never mind the risk of loss which is infinite.
Now as to YIPI and the 69,985 shares currently short, some of it as an actual short position taken by small traders. But most of it appears to be a "hedge" by a block position holder. Looking at the consistent rate of Short Interest the position is constant yet here is why it isnt a standard short position by retail traders, looking at the FTD data it doesnt support retail going short.
