Nephros Inc (NEPH)

[thecon00]

livelaughlearn's great post from yahoo: (2parts)
There are a lot of questions on the message boards regarding why the MM’s would be “playing these games”. I have also spent a lot of time trying to educate how the MM system works and why they do the things they do (like fill an offer-to buy shares at .71 at .57-which makes no sense especially when it is at the bid and they make no trading profit). Some of what I say is speculation on my part-trying to guess what their mind set is because I am not on the trading desk and have no idea what their trading account looks like. One thing I know for sure…..this is not trading in a rational market.

What I do is take what I do know:

1)Based on the Fails to deliver before the reverse and the price action there seemed to be a net short position in the stock in some MM accounts.

2)I wrote a lot about that before I left the board for a while and the downward pressure also had Southpaw buying some shares (as evidenced by their recent filing) so it could not be net long in the trading account.

3)On a stock that does not have a lot of volume (as NEPH did b4 the reverse and after) MM’s like to make a nice profit from shorting the stock. They play on fear of the unsophisticated investor, sell net short in their trading account and try and pick up shares from panic sellers at the lower prices.
4)The selling before the reverse and stock offering from those who did not believe in the stock or left after the FDA Non-Equivilant decision left a core of people who wanted to take the opportunity to “average down” and see if this money would allow NEPH a chance to get FDA approval and time to see where the military, Steris, and oversea sales would go.

5)There is a very very small float on this stock and even less after the three institutions as has been discussed a lot by MK and others. Most of the float is also in the warrants which will be discussed later.

6)There is no stock out there right now (I said b4 that I speculate but I am very confident about this statement. The trading aspect (I will discuss the fundamentals in another thread) of this stock is a very very tight rubber band. Any positive news on this stock would send it soaring b/c 1) there is no stock for sale at levels below $5 2) the net short position in the MM’s account would put added buying pressure on those accounts due to margin requirements 3) lots of people that sold would come back in to try and make up for their losses.

7)The small float and the institutions that have restricted stock make for very little available stock to fill buy orders and the MM’s will not be able to short it because they are already short