ERHC Energy Inc (ERHE)

[Krombacher]

In my example to which I'm replying, we have two types of erhc investors. We have the chocolate bar eaters and the silver bar hoarders.

The short sellers would like to cover as cheaply as possible... but the only investors willing to part with their shares that cheaply are the chocolate bar eaters.

But... thank goodness, the chocolate bar eaters don't have too many shares. They'll sell maybe a few tens of thousands of shares so they can indulge in a chocolate bar.

And so on the greys where any price is possible... you will see trades take place between short sellers and chocolate bar eaters.

But the short sellers will NEVER be able to cover in full from just the chocolate bar eaters.

At some point, shorts have to cover with the silver bar hoarders. But the silver bar hoarders are smarter than the chocolate bar eaters and they value what they have at much higher prices.

But short sellers aren't yet ready to accept the above and so they aren't ready to pay the much higher price point of the silver bar hoarders.

And so we have an impasse of no volume and the only trades occurring are with the chocolate bar eaters.

But sooner or later the shorts will be pushed to cover. When is that push? Could be if the price rises and margin calls hit. Could be in revocation when shorts need the shares or stay short until... a dividend or Total buy out... at which point they're only prolonging the agony... but sooner or later the end game is clear. The shorts will suffer and the silver bar hoarders will prosper.

It is what it is.

But the smarter short sellers who get all the nuances will want to cover now before the shorts who don't even follow this investment catch wind.

Krombacher