No Own - No Sell

[Bird of Prey]

Well Well Well,

It seems the good ole shorts are at least reading over here. Been following their attempts to discredit over on their home board where Gary has chosen to battle them in their own back yard.
So many slings and arrows. We must have really smacked 'em right between the eyes. The number one point they miss is that the petition does not call for an outright permanent ban on Short selling. It specifically calls for a temporary ban until new regulations can be put in place. It then asks for specific weaknesses in the current short regulations to be addressed. Nothing more and nothing less.
This certainly has raised the ire of short sellers. Particularly those that use off-shore accounts to illegally short here in the United States.
Behind the scenes hundreds of people are sending us information on these shorters. Not surprisingly many have serious criminal backgrounds with real ties to organized crime.
That they claim to benefit the market by exposing poor management and outright fraudulent companies is not the issue. The issue is that regardless of the companies "worthiness" they can short the company into bankruptcy.
Let me give you an example of how (and WHY) this works.
First, you must realize that the shorts need only have 20% of the amount the wish to short collateralized. that means that one individual with $20,000 can short $100,000 of a company. For arguments sake let's say the company trades at $20 a share and has 10 million shares outstanding. In the case of an illegal off-shore short, 5000 shares of dilution have been added to the available trading shares. By itself not a lot and not a big impact on the market. But for a moment, let's presume that the reason this person shorted this particular company was because a private website accessible only by the membership has profiled this company and recommends them as a like short candidate. Further this website has 100 members. All of the members have more money to short with than our example (they spend $7200 a year for membership) but I'll use that number as a base. Because they are paying for the pick and because it has been successful for them in the past we will presume that all participate in the short exercise. Now there are 500,000 shares short, 5% of the outstanding shares. Still this may not be enough to seriously impact the price, but...others see this activity and once the original group has established their positions the bashing campaign begins. The number of individuals joining the short bandwagon can skyrocket. For simplicity we will only presume another 900 shorters join in and at half the original amount each...this adds 2,250,000 share to the short interest.
Sidebar: This does not show up as short sales, only as sales. In a month some of this will show up in a short interest report, but since that information is voluntary and certainly not going to include the illegal off-shore brand of short selling, around the 15th of the following month. By then it will be woefully out of date and under reported.
Now we have a 27.5% short interest, Of which most will never show on anyones short interest report. With this amount of shorting the stock price has likely taken a serious hit. As a result some of our intrepid short sellers now have capital freed to increase their position as the margin requirement is lower. Also it is common practice not to dump the whole wad in at once so they have plenty of capital to continue to short the company.
By now bashing is in full swing, quite likely with the aid of major news sources and analysts on board the short bandwagon. Many small investors will begin selling accelerating the decline. The more it declines the greater the power of the short players (does this sound familiar anyone? does toxic death spirals come to mind?). The company issues positive release after positive release. Company is still profitable and unless something strange happens, like market capitalization being seriously undermined, they should be OK. But the selling continues. Though IBD and WSJ may only be reporting 3% or 4% short interest, we already know that number is much higher. One big clue is that IBD will be showing the company is in serious distribution. Only the short sellers know that it has all been orchestrated and the outcome fait accompli from the moment they started. If the management was smart they saw what was coming and tried to stop the bleeding by buying up company shares. But to do so they have to put up 100% of the money needed to buy the shares. Even if they are able to convince the public to join in the fight the public can only margin at 50% (in some cases higher). the shorts have the advantage in that they can create dilution, easily manipulate sentiment and have at least 2.5 times the buying power of longs. Add the completely unregulated off-shore element and the outcome is the same as if one football team were allowed to have 15 players on the field. Eventually, regardless of the soundness of management or the viability of the company, starved of capital it goes out of business, And the shorts claim another victory. The only ones to benefit were the short sellers, who got rich by usurping the property of others and destroying it's value.
No matter how they try and claim otherwise they have an advantage that they don't want taken away...and that is exactly the purpose of this petition. Join us in the fight for a truly level playing field. Stop this unscrupulous element from destroying the value that made this country great.


The Bird of Prey