In any other situation you are correct about not having to cover as long as you cover your margin. However, those shares don't exist. They basically sold shares naked.
Due to the fact it just happened to do an R/S, the shares can be easily accounted for in a matter of days. That is why the company issued a new cusip number.
These shares, I believe are attached to the new cusip number. The company could come down hard on Scottrade and file a lawsuit if those shares are not covered ASAP.
It is critical for the company to not let too many days go by before they address the issue. I am sure they are letting these settlement days happen and seeing where the stock settles.
Due to the massive short, it is impossible to not see the stock price north of $2.00 in the next day or two. If not, then we have someone illegaly shorting the stock that someone else is covering.
That can't happen, cause there is no stock to short. Worse case scenario, if this thing doesn't keep going up, I advise everyone to call in their certs. That way the company will know exactly who is holding what and it won't be sitting in any brokers account for them to short against.
I really don't believe the company wanted their stock to tank the way it did. They did the R/S for numerous reasons. One important reason was to get the share price up so they can get new financing to do acquisitions and mergers.
New managment have been involved with AMEX companies. They have done IPOs. I believe their initial intention was to get the stock price up after they did the RS. Not fall back below .01 Under bogus selling. I believe management's background's experience in the industry will be able to detect some nonsense if there is any going on in the stock.
Up to this point, it looks like short covering with some folks taking profit.
We see any downside in the near term, it will be the shorts attempting to shake some weak hands out of their positions so they can cover.
As long as we hold, they will have no other option, but to push the stock price much, much higher. That only happens if we do not sell.
This story is far from over.
AI
