Those are interesting statistics and points that are being made. But
let's look a little closer at what is going on. The "biweekly" short
interest report is a point in time, that is, it is the "open" Short Interests
at the close of the market for the 29th of August. The questions that
arise are: 1) What would be the Short Interest at one hour before the
close? or 2) What would be the Short Interest positions at the close
of the prior day? Or two days prior? Or three days prior? Believe it
or not, this information is actually available to the company if they
were to choose to access it, and it would be interesting, whichever
way it pointed.
But we're not done yet, let's look at some other related statistics:
............................Short Intrst...Daily Volume...Percent....Closing PPS
Wed, 31 Aug.............927,732........3,822,909....24.27%........$.0013
Tue, 30 Aug..........16,253,831......35,058,893....46.36%........$.0016
Mon, 29 Aug.........10,416,000......10,416,400....99.99%........$.0012
Fri, 26 Aug...........19,757,776......21,799,276....90.64%........$.0012
Thu, 25Aug...........15,214,946......25,675,169....59.26%........$.0012
Monday the 29th of August, 99.99 percent Market Maker shorting activity
to provide liquidity? NO CHANCE! Those who were watching the market
activity that day saw the Market Maker HSDN seemed to have an endless
supply of shares. The supply was there, at the PPS of $.0012, so to argue
that the other MM's were creating liquidity as a reason for the high percen-
tage is baseless. What about the possibility that the MM's were competing
for shares, so they were shorting into the bid to get shares first? AGAIN, NO
CHANCE! If MM's wanted shares that bad, we would have seen 99% shor-
ting activity everyday, and in the 5 day interval above, there was no sign that
the MM's were all that concerned about being the first to fill a bid, especially
since the bids were coming through accounts to which the MM's were the
initial point of access. Remember, it wasn't one MM, but all the other MM's
other than HSDN that day that were participating in the high short selling.
So why the high percentage rate of short sales vs overall volume? First,
look at it this way. If the MM's wanted to, they could short sell into the
bid every time they filled a trade. Then the question becomes: Why did
the MM's short sell nearly 100% of the transactions that day, and not
just one MM, but almost all of them? And that is also the question of
concern. Did the MM's work together to show some kind of solidarity in
that they will control market activity and there is nothing that the average
investor can do about it? That is a very worrisome question. At the very
least, it looks extremely suspicious. Draw your own conclusions.
At this point, it would help to have intraday charting for those days,
either 1 minute or 5 minute intervals, then you could see what was
really happening. Looking at August 30th (the next day), the majority
of the trading was early during trading hours, and the PPS dropped
from .0012 to .0010 before climbing up to above .0016 by the end of
the day. What is significant about that day is that the ask by HSDN
was raised to .002 and was the reason for the gain (there was no
news to create the run). What was also significant was that the
shorting activity fell below 50% during those two days.
Opinion and Interpretation:
Some have posted on this board that there is no shorting of penny
stocks, and especially of HLNT. Clearly, this is not the case. The
short interest of August 31st shows that there is shorting of HLNT's
stock, also a penny stock.
What happened was that HLNT's 2nd quarter financials showed that
the revenues were lower than expected. Many were afraid that HLNT
would need to do some kind of financing to continue its operations.
The shorters figured this out, too. So the shorters waited, looking for
any sign that a PIPE was being used, knowing that the stock would
drop in price. When that occurred, they attacked the PPS, shorting
heavily. Unfortunately, the PIPE, through HSDN, was blind sided by
this and dropped the asking price to try to get under the shorting
activity, until the PPS reached his bottom price at about $.0012. At
$.0012, the ask on HSDN quit dropping. While there was still shorting
activity going on, when the MM's realized that the PIPE was not going
to chase the PPS anymore, that took away the incentive of the MM's
to support the shorting assault on HLNT. The stock stayed in the .0010
to .0013 range, but never hit the 000's (as a few had predicted, and pro-
bably with some interest that it do so). When the PIPE raised his asking
price, there was a last short assault on the 30th of August, and then the
PPS started moving up again.
In review, the company has seen this happen, and will be better prepared
for it in the future. It will be careful about broadcasting its actions so that
shorters cannot attack on top of pricing corrections if they should ever
need to seek PIPE funding again.
The opinions expressed herein are my own, and each investor should
conduct his or her own due diligence and make investment decisions
accordingly.
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