Indeed, but what we have here is one step further in that the shorts didn't only borrow the shares, they simply printed them out of thin air. This is called naked shorting. Naked shorting therefore allows a short seller to go beyond those shares which are available for shorting.
How do i know that naked shorting is occurring? I know this because for a short seller to short in the conventional way, he must borrow shares from someone holding the shares in a margin account. But there are very few investors who can buy erhc on margin. In the U.S., OTC stocks cannot be purchased on margin at most brokers except at interactive brokers. Hence, for this much shorting to take place, the shares can't be merely borrowed as is the case in conventional shorting, but they must be printed as is the case with naked shorting. This is why naked shorting is illegal in the USA.
It can be very lucrative for naked shorts; however, if it is obvious that the company is going bankrupt and the short seller knows he'll never have to deliver any shares or dividends on those shares.... but if the company doesn't go bankrupt and prospers instead then it's quite a hairy situation short sellers place themselves in.
They must buy those shares back and close their positions or else provide the shareholders of the shorted shares with all the benefits associated with those shares if dividends are paid or Total shares supplied in a buy out.
Since most OTC stocks never achieve dividend paying status and many go bankrupt, OTC companies are rife with short sellers both conventional and shorting out of Canada where naked shorting is allowed.
It's literally a racket.
In fact, without a threat of dividend or buy out, why would you ever want to cover as a naked shorter?
If the stock price appreciates in value, never fear, you, as a naked short seller, can print more shares and inundate any demand for the stock with an insane flood of supply. And if as a short seller, your printing of shares also results in depressing the stock so that any convertible debt tied to stock price becomes toxic for the company, then the better is that short position because the higher becomes the probability of bankruptcy. Throw in the possibility of revocation and voila a lot of scared longs will sell allowing the short seller to cover as well, not that he needed to do so, but nice to have.
Except this time management caught on to the scheme and no amount of denials of the existence of short sellers will change that.
So... revenge will be had and it is the "real" reason, i believe that erhc has been so silent vis a vis the "new paradigm," which i also believe was by design to trap shorts.
1) there will be no bankruptcy
2) every effort will be made to deliver a dividend and/or Total shares in a buy out
3) revocation will likely be avoided but even if it is not avoided... management will make sure that it is a nightmare for short sellers and longs will do their part by not selling into revocation.
Shorts are screwed and there's no way out for them. But then... they had warnings from day 1.
Krombacher