What is the number of naked short shares out there?
This is an interesting question. Unfortunately we don't know for sure. But we can make some reasonable guesses.
The last short report showed 2.47 million shares short as of August 9th. Source: biz.yahoo.com
If we assume that in the 20 trading days from August 10 to last Friday, the shorters dumped an additional 25,000 shares a day, then another 500,000 shares have been shorted. That means that the short position could quite likely be close to 3.0 million shares. This over 10% of the outstanding shares at this point, and is likely over 15% of the float.
CC has almost certainly shorted the 1.33 million shares required to fully hedge the first tranche. If CC hasn't been lying to Valence, they didn't sell any shares in August, at least through August 24. The most they could have shorted in the last nine days is 270,000 shares. This gives CC about a 1.6 million share short position. (They may have also shorted against the second tranche prior to the July 27th date, but for the moment let me ignore that.)
If CC is short around 1.6 million shares, this leaves naked shorts with about 1.4 million shares short. If they decided to cover at a rate of 50,000 shares a day, it would take 28 days to cover.
Unfortunately we don't know CC's short position accurately. But they do, and I am sure they will take this issue into account when they make their decision to convert. (This is one more reason why they should be forced to disclose their positions monthly in line with the intent of the SEC regs.) If the naked short position is as large as I estimate, then this could encourage them to go long to play the conversion bounce.
This looks more and more, like all the elements of a short squeeze are in place... and I haven't even mentioned the possibility of a Valence PO announcement.
Paul |
