Epicus Communications Group Inc. (fka EPCG)

[PenSec]

Time to buy and hold imo...

I just saw this on my Schwab account..could have been there all along, but just noticed it today..

Hard to Borrow Warning for EPCG-

Good Explanation from Jim Cramer

http://www.thestreet.com/story/862233/1/knowing-the-rules-of-the-shorting-game.html

You have to be able to borrow the stock first to be able to short it. You have to find out from your broker if the stock can be borrowed first.

That's a difficult process sometimes. First the stock you want to sell short must be located. A whole department in a brokerage house, the "Locate" department, tries to find the stock. Sometimes it is impossible to find because there are no shares around to borrow. This "hard-to-borrow" status occurs when stocks that have a very small float get ganged up on by a group of short-sellers.

Why else does a stock get hard to borrow? Often the owners of stock don't allow their stock to be used by short-sellers. They take their stock out of the borrowing box that each investment firm has. So for example, let's say you own National Gift Wrap.com and you are convinced the fundamentals are strong. But you think the shorts are leaning all over your stock, pressing it down.

You may be unwittingly aiding the shorts by allowing your National Gift Wrap.com shares to be let out to short-sellers. It will be lent out if you say nothing because you signed a "hypothecation" agreement when you opened your account, allowing them to lend it out. That's one of the great secrets of Wall Street. It happens automatically unless you say something.

If you take National Gift Wrap out of Street name, or request that it can't be borrowed by short-sellers, the brokers have to obey your wishes. Are you an unwitting abettor of the bears on National Gift? Ask yourself that question with any stock you are long.

When stocks get hard to borrow, sometimes the short-seller has to pay, literally pay cash, to find the stock he needs to stay short. He pays it as a percentage of the dollar amount that he sells short. People right now are paying as high as 15% of the proceeds to stay short on hard-to-borrow names.

What happens if you short a stock and the stock can't be borrowed? In other words, more stock is shorted than can be found because so much has been taken out of Street name and so little floats to begin with?

Ahh, now that's the biggest question. I have had it happen to me several times and it is quite frightening even for professionals. First, you get warned by your custody broker that you are "failing to deliver" stock. You complain, if you shorted legitimately, that you got a locate first. Your custody broker then tells you another Wall Street secret: It doesn't matter. If you have a locate and the stock has, in the interim, become hard to borrow, you are just plain out of luck. You have to scramble to find stock all over again, and if the broker can't find it, you probably won't be able to find it either.

The custody broker will then threaten to "buy in" your stock. These are the two most dangerous words in the lexicon of the short-seller. That means the broker will simply go into the open market and buy your stock back wherever he wants.