Hi Tom - <<Is there any detective work that can be done which would determine if PH is actually right, (and we are looking at a shareholder selloff), or, he is wrong, and that we are
currently being shorted to death by one or more of the pp holders? I know your opinion on the subject, I was just curious if there was any ACTUAL PROOF one way or the other.>>
Please review the discussion below on a legal discussion forum regarding the topic of short selling and private placements. One of the participants appears to be Joseph G. Martinez, VP/Counsel JMAR Technologies, Inc. (Nasdaq : JMAR). I found it to be very interesting reading.
biz.yahoo.com
washlaw.edu
For me, the highlights of the conversation were:
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(1) "The first, more fundamental, legal reason is that the SEC has taken the position that shares which were owned but which were not freely tradable when the short was created cannot later be used to cover the short postion, even though they have subsequently been included in a resale registration statement or, if not, have run the Rule 144 holding period. Conceptually, the SEC takes the position that the shares which were later delivered to cover the short had to have been in existence and freely tradable when the short was created because that is the time they were "sold" publicly."
(2) "A company noticed a substantial short position arise in its stock
almost 1-1/2 years ago. The short represents about 4-5% of its float and about 10 times its daily trading. This occurred immediately following having done a private placement involving a little more than the number of shares in the short. The company agreed to and ultimately did include the private placement shares in an S-3 Registration Statement. The company strongly suspects, but cannot prove, that the buyer in the private placement did the short. The company's stock was at an all time high at the time of the private placement (and short) and has since dropped about 50%. The company would, of course, like to get rid of the short."
(3) "Although we cannot prove who the short is and they deny
it, I understand from NASDAQ that we cannot find out the identity of
the short seller without a court order."
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It seems to me that TSIG should consider the following:
(a) Determine the short interest in the stock. I would think the TA would have this information.
(b) If it appears that there is substantial shorting - seek the identity of the short sellers by court order if necessary - and determine whether any SEC violations occurred (i.e. covering a short with shares that were not freely tradable at the time the short was created - which was the scenario that Zeev seemed to describe):
Message 10194331
Regards,
Phil |
