AI
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Sunday, August 20, 2006 10:41:11 PM
The hard truth is that there is a large naked short position on SLJB and that it COULD be a major problem if not dealt with properly. See my previous post 37197.
Just because the MMs have created a big mess doesn't mean that the 'system' can handle it - look back to the Pegasus/Sedona fiasco and you can see that the SEC knows they have a big problem with naked shorts in general - that's why they 'grandfathered' much of it away with their 2005 SHO regulation ...
The good news here is the Steve Sulja et al are well aware of this - and they are trying to a) politely warn the shorts with their PRs and 'short captured capital' approach, and b) they are giving the MMs plenty of time and opportunity to cover below 10 cents. They can't just say "in your face MMs, we're going to screw you", because the REVERSE can easily happen - nobody wins in all-out nuclear war (!)
I am still wary that not all MMs will play fair here - they have never lost in the past, and it's not their business to 'lose'. But I do feel very positive that SLJB is handling the situation very well, seeking a win-win with the MMs (as a few of us discussed yesterday on this board).
We'll see how this plays out. The MM's can either be reasonable and cover (like they have over on PGPM), or they can get ugly and try to naked short this a whole bunch more (and dig themselves into a deeper hole - and stall our share price rise for quite some time). This would start all out war. My opinion is the former - that logic will prevail and that the MMs will cover (reluctantly) and go play their games somewhere else, with companies that are losing money and don't have SLJB's potential. There are plenty of those to naked-short into the ground, and they know that. Why jeopardize your cash cow (the naked shorting loophole in the system) by taking on a company like SLJB that, surprisingly (to them), looks like it's actually going to succeeed?
Until the MM's do cover, the 'float' on SLJB will be a mystery, since it consists of ?millions? of 'failure to deliver' (naked short) certificates floating in cyberspace ...
IMHO, I don't think most people on this board realize the seriousness of this naked short issue - if the share transaction system breaks (i.e. if it is overwhelmed by FTDs and leads to MM asset seizures, investigations, etc - and don't say it can't happen because it already has before in the great US of A), it doesn't matter a damn how good SLJB's business is, we get halted and we languish in the courts while the SEC tries to sort out the mess. I DON'T think this will happen here, Sulja is aware of this scenario and for the reasons stated above, they are dealing with it. But when people start talking about the 'float' as though naked shorting either doesn't exist, or, isn't a factor, I think they are dead wrong. It is an issue - a potentially HUGE issue - but I haven't seen anyone address it as well as Sulja et al seem to be addressing it in their PRs and with their approach to the MMs. This is one major reason why I am long on SLJB ...
Godd morning from the Middle East
Opp
Just because the MMs have created a big mess doesn't mean that the 'system' can handle it - look back to the Pegasus/Sedona fiasco and you can see that the SEC knows they have a big problem with naked shorts in general - that's why they 'grandfathered' much of it away with their 2005 SHO regulation ...
The good news here is the Steve Sulja et al are well aware of this - and they are trying to a) politely warn the shorts with their PRs and 'short captured capital' approach, and b) they are giving the MMs plenty of time and opportunity to cover below 10 cents. They can't just say "in your face MMs, we're going to screw you", because the REVERSE can easily happen - nobody wins in all-out nuclear war (!)
I am still wary that not all MMs will play fair here - they have never lost in the past, and it's not their business to 'lose'. But I do feel very positive that SLJB is handling the situation very well, seeking a win-win with the MMs (as a few of us discussed yesterday on this board).
We'll see how this plays out. The MM's can either be reasonable and cover (like they have over on PGPM), or they can get ugly and try to naked short this a whole bunch more (and dig themselves into a deeper hole - and stall our share price rise for quite some time). This would start all out war. My opinion is the former - that logic will prevail and that the MMs will cover (reluctantly) and go play their games somewhere else, with companies that are losing money and don't have SLJB's potential. There are plenty of those to naked-short into the ground, and they know that. Why jeopardize your cash cow (the naked shorting loophole in the system) by taking on a company like SLJB that, surprisingly (to them), looks like it's actually going to succeeed?
Until the MM's do cover, the 'float' on SLJB will be a mystery, since it consists of ?millions? of 'failure to deliver' (naked short) certificates floating in cyberspace ...
IMHO, I don't think most people on this board realize the seriousness of this naked short issue - if the share transaction system breaks (i.e. if it is overwhelmed by FTDs and leads to MM asset seizures, investigations, etc - and don't say it can't happen because it already has before in the great US of A), it doesn't matter a damn how good SLJB's business is, we get halted and we languish in the courts while the SEC tries to sort out the mess. I DON'T think this will happen here, Sulja is aware of this scenario and for the reasons stated above, they are dealing with it. But when people start talking about the 'float' as though naked shorting either doesn't exist, or, isn't a factor, I think they are dead wrong. It is an issue - a potentially HUGE issue - but I haven't seen anyone address it as well as Sulja et al seem to be addressing it in their PRs and with their approach to the MMs. This is one major reason why I am long on SLJB ...
Godd morning from the Middle East
Opp
