any former insider or non-affiliate who decides to sell a large block of shares to a market maker for a set price allows them to use those shares however they see fit. i've thought for a long time that our former directors may have made a few block transactions like this, and if so we've probably been suffering the fallout ever since. please keep in mind this is just a theory of mine, but given the catastrophe of the last few months, i think it makes sense as one major factor out of many others that affected the stock price.
let's try to peek behind the curtain just for a moment. no one in their right mind would bomb the bid like this, breaking through key support levels all along the way, if it meant they were affecting the market for their own stock. if so, they'd basically be taking money out of their own pocket. but if the deal was already done, and the money was made, any MM who was profiting from a short position would love to use this same inventory to tear the chart to shreds. in the process they get to load up a lot of players who are on the long side. these big fish have deep pockets and are savvy enough to know the game. as long as they get in cheap, they don't mind a few months of "pain".
retail, on the other hand, is being driven mad by this stuff and is consumed with all sorts of other issues that don't seem to bother the big money. what am i driving at? many out there have been afraid of rule changes to 144 allowing holders of the private placement shares (10M of them bought at .10) to sell at will, beginning tomorrow, 2/15/08. enough fear is in the market about this right now to create a "self-fulfilling prophecy" where many of the longs on the board now literally throw their shares away on the mere chance we go lower. it's really sad, but that's the way the market works. most traders ultimately sell out of fear, not greed.
so, where's the bullish part? well, the current insiders and the private placement holders -- these folks will either sell or they'll hold on, and in either case we must deal with that overhang... or at least that's what the bears would have you think. they'll insinuate you either have to chew through it now at lower prices, or you must feel their selling pressure later on, right?
maybe not. "overhangs" sound ominous, but this is the case with ANY stock, pennyland or big board, and as long as the fundamentals are good and the people who choose to monetize shares do it intelligently (like in out-of-market transactions to long term institutional shareholders), then these shares never have to enter the market and affect the price action at all. wouldn't it suck to sell out of fear, have a DR client buy all your shares, and then see them run the stock up 30% in a day or so? wouldn't it suck even more to watch them pull a clean triple off the bottom in a matter of a few weeks as we head into earnings?
yeah, sure it would, but what about tomorrow? what about doomsday? i personally think we won't see that much selling, and when the market gets a clue the reality didn't match up to the scare tactics we'll start seeing some relief-rallying. the fact is we've seen a ton of volume lately. some of our most savvy, non-retail MMs have been stacked up on the bid buying all the way down from a buck, at .05 intervals. eventually these investors they represent, many of them DR and TB clients imo, aren't going to want to be played like chumps anymore.
as far as their full positions go, they've probably got a few million more shares left to grab, but once they get those boats loaded, off we go imo. i'll go out on a limb and say there's no way this much big money loads a stock without getting a nice profit out of it, and that's why you won't see me whacking the bid. instead i'm going to buy the fear.
best of luck to all...
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