>>Covering a short sale with newly-issued shares from a direct placement is against SEC regulations<<
Correct me if I am wrong, but, once the shares have been shorted, the owners of the long shares are now in a static position. By covering the short shares they are effectively selling and buying an equal number of shares simultaneously. My point is that legal or illegal, covering with these shares makes no difference to the market. If they feel that the price may now go higher, it would make sense for them to cover by buying shares in the open market, perhaps buying long and even shorting again, selling or buying at different points KNOWING THAT THEY HAVE LIMITED RISK TO SUBSEQUENT SHORTING SINCE THEY HAVE SO MANY LONG SHARES TO LIMIT THEIR SHORT SIDE RISK.
