I've been doing a lot of thinking on this...
The R/S in itself will not force any shorts to cover.
At this point I'm not convinced a CUSIP change will.
IMO, two things will force a cover.
#1. Obviously a buyout. IMO the shares would be forced to be covered at the buyout price. No squeeze. I could be wrong here, that's just my understanding.
#2. The inducement of large amounts of pain... which is where it gets interesting.
I, like many others, am not happy with the 300mm A/S post-split. But, a beautiful strategy came to mind, and I would love to have some brainy replies to this...
Let's say for instance that post-split SPNG announces a dividend. A dividend designed to increase liquidity and to better balance the authorized capital between the co. and shareholders.
What if SPNG, post-split, announces a 2 for one dividend? For every one share of SPNG you have you get 2 additional shares issued from the authorized shares.
This would result in dilution obviously, making each share you own worth about 66% less, but you would have 200% more shares so it would wash. (sounds weird but the math is right, for instance 1 share x $1.00 = 3 shares x .333)
It would also cause shorts to either pay this dividend, cover, or sell 2 more shares short for every short share they have. Every short position is responsible for paying the dividend for thier position. My guess is they would cover.
It sure would make sense out of a lot of things that don't add up, primarily a post-split bloated A/S and a relatively small number of shares outstanding, not to mention an overly aggressive reverse split ratio.
Thoughts?
