Hello hanscott,
I will try to humor you, though it is probably a waste of time. You probably will not change your mind, and I am probably not going to change mine. You feel shorts have nothing to do with the price getting nearly cut in half, and I feel it has everything to do with it. Perhaps the truth is somewhere in the middle. We may never know who is right, and personally, I could care less.
You mention that the only numbers we have to go by are short interest numbers, which were going up along with the price, but fell along with the price. A broad generality. And without looking at the numbers, I doubt they fell by much. Some shorts covered, of course. The ones with large positions were most likely unable to close out their entire short position-to cover would have brought the price back up. Can you imagine if they tried to cover a million share short position all at once? I believe they cover gradually, and likely have been covering slowly in the days since the drop. All computer generated-short, cover, short cover, keep the price low if they can.
You mention shares available to short were limited. Are you going by Fidelity’s borrow rate? That is just Fidelity for the retail investor. The institutions are not going through Fidelity. In theory, the entire tradable float could be shorted. Market makers also allow naked shorting all the time. Some shorted shared are never even borrowed-they just issue a fail to deliver. In this case, the market makers probably never blinked, knowing that some shorts were covering and they could easily come up with shares to accommodate the newly shorted shares.
Ok, manipulation is illegal. I stand corrected on that one, but having the SEC actually proving and prosecuting it is another story, and institutions know this.
Of course, institutional holders of this stock are not happy to see one of their stocks shorted heavily. But what can they do? Buy more, perhaps, taking advantage of the low price, which is what I have been doing. The one thing they don’t seem to do is freak out and sell, like a lot of retail investor’s do. I think it is simply accepted as business as usual on Wall Street.
Look, I do not care if you are not convinced or think I am wrong. And I said, it was all a guess. I could be wrong. But from being invested in biotech for a while now, I really do believe that manipulation of small cap biotech goes on quite frequently. The great thing about America is that you can think what you want. Good luck to you...
