Originally posted by RLWSNOOK - a DayTrader.com board - January, 30, 2009 Brought to us by Ninja7 - CDIV board - Wednesday, May 26, 2010
For years people have said that these companies are scams only for some crooks to make some money off of while they sell stock, and before they go bankrupt... Now I do think that goes on, however... that is not always the case there are very good companies on these boards as well.
I am sorry if this post goes a long time I will try to cut back as much as possible but it is very hard to say what Im going to say without going on and on..
OK so why does a company come to the OTCBB or pink sheets? It is simple, that is a place for them to access capital.. Now many companies don't understand how stocks work and that selling some shares to keep your company growing is seen as a very weak sign... (Even if they continue to grow their EPS)...
So what happens, a hedge fund or Market maker (mm) finds a stock that has some volume... if they issue shares and raise the AS they will start to Naked short sell (NSS) the stock... Now there are many boards like this one where people talk about their stock every day.. These hedge funds\mm hire people to go on the boards, and bash the company... They blame them for selling shares and doing shady things, all while their bosses (the hedge funds, and mm) short the stock to no end...
Most companies have no way to stop this, and it drives the PPS down, which when they need capital they have to issue even more shares than before... Then once they figure out what's going on it is too late, they complain about naked short selling, but the bashers on the board have already won all the longs over... they get them (the longs) to sell their shares, and the company doesn't have the capital to buy back the stock or stop it... they spend too much time worried about their stock than they do about their company and they go out of business.
Once this happens the bashers are like see I told you so, they are just crooks who wanted to issue stock, everything they ever did was a scam... the longs are all upset so they agree and have distrust for the company and all others so if anything else ever happens close to this, they say OMG this happened with xyz stock I so know what's going on (of which there is already a basher there saying yup your right)...
but remember if a company goes out of business the hedge fund\mm never has to cover their position..
So wait you ask, I thought the government was suppose to protect us against Naked short selling and what about the REG-sho list.???
I agree the SEC is suppose to look over short selling, but a few years ago they said it never could happen and doesn't go on in these markets, then once they were forced to look into it, they said they had to grandfather in the fake shares because there were too many... It's a joke people the SEC has done nothing. and is in the back pocket of hedge funds and MM...
But ya you say they have been cracking down on it and have a REG sho list for Fail to deliver's (FTD's fake shares that never are filled.. what this means is they sold you something but never gave it to you, it acts like a stock but really is just air... they sold you nothing)...
The way FTD's show up is when they happen through the regulatory body the DTCC.. but MM can go outside of the DTCC and clear these shares without it showing up... (this is known as ex-clearing).. So pretty much it is like doing a black market sale... the mm is given money for something that is fake, and because the DTCC doesn't know about it, it doesn't show up on the REG-sho list...
there are a bunch of other loopholes for Naked short sellers to do this but I can't go into all of them here. Former chairman of the SEC PITT speaks of this problem in this youtube video you are welcome to watch it to see the other issues.
This is a very big problem in many ways. 1. the MM and hedge funds are stealing from you the common share holder 2. our sec does nothing about this 3. the mm and hedge funds are cutting off the small companies which could help to grow our economy and get us out of this mess we are in right now.. 4. The hedge funds and MM can not cover their short positions and if forced to it would pose a systemic risk to our economy... 5. Many younger investors look to the micro-cap companies to invest in because they don't have the capital to invest in larger ones. By doing this it makes it so they will be less likely to invest in stocks and our economy will not grow as quickly because people won't trust the system...
let me know if everything was clear, I gave one reason for the NSS to happen but i know for a fact there are 100's of others, just wanted to keep it simple...
It is a very hard point to understand so I don't expect you to get it right away... but I look at it this way... Imagine the world with no NSS as the world when people thought the earth was flat... It wasn't true but they bought it as true.. Now the world with NSS is the world that we live in.. It is hard for the flat world people to see this to be true, but if they look into it more they will come to understand that the world really is round..
If you don't believe me or need more info on how shady our system is and Naked short selling there is a great slide show it is very long but really worth it to watch... http://www.deepcapturethemovie.com/
Hope, I opened a few eyes. If you have any questions or don't understand or don't agree, feel free to post and ask about or dispute my points...
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