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Replies to post #95009 on North Bay Resources Inc (NBRI)
Market makers keep little to no inventory of sub-penny stocks. Especially ones with toxic death spiral convertibles, who are going to be worthless eventually. It is a matter of when, not if. Which means when they get an order, they short the stock to the client and then covers almost instantly. Usually that means buying the stock from the toxic death spiral funders, who have a standing order in for millions to sell - they will sell as much stock to the MM's as they need. If an order comes in for 10 million shares at $0.0002, the MM sells it short to the customer (because they have no inventory) then immediately buys the 10 million shares from the toxic death spiral funder at $0.00019 (or less) and is flat. But the short volume report only records the short leg - they don't reconcile the long trade, which is why short interest is ZERO. These MM's are happy to make the spread with zero risk. Keeping any inventory, or holding a short position overnight, is too risky.
Ironically, those daily short volume numbers are highest with toxic death spiral stocks under massive dilution. NBRI is the perfect example. The MM's know they don't have to keep a single share of inventory because the toxic convertible holders will sell them as much as they need to cover any order.
07/08/15 8:12 PM
