When the naked shorter sold short, money was put in his brokerage account in exchange for the shorted shares, and the account will show the shares short in that account. If those shares are issued a dividend, the brokerage holding the short position on their books will take money from that account in order to pay the dividend on the long shares held by other customers, or held by customers of other brokerages. If there were no record anywhere of who sold the shares short, then there might be a problem, but since there's a long for every short, even the naked shorts, the brokerage holding the short position would be responsible for paying the dividends on those shares. The company issuing the dividend is only obligated to pay dividends on its outstanding shares--not on phantom shares sold by naked shorters. It will ultimately fall upon the brokerages holding those naked short positions to pay the dividends on those shares held long in other accounts. Faced with these demands for cash, the brokerages holding the short positions on their books will issue a call to the accounts that are short, and if the calls are not met, the stock will be bought in by the brokerage, and the shorter will still be obligated to the brokerage for any losses on the position.
It is these margin calls for cash resulting from dividends, as well as margin calls resulting from stock price appreciation due to the dividend, that will turn up the heat on the shorts and force them to cover, thus increasing the PPS even further, and sparking what is known as a short squeeze.
It is my opinion that there is a substantial naked short position outstanding in our stock, left over from last year. Given the razor-thin float we have, any dividend announcement would result in panic buying as people fight over what few shares are available. Due to recent PPS increase, margin calls are going out as we speak, to everyone short our stock. The short squeeze may, in fact, have already started. A dividend announcement would definitely get it on and cracking.
A good bottom's hard to beat.
e
