Rich, I am not sure why you suggest that CC has to "spend money" to short. Last time I checked, when one sells stock (short or long) one gets paid, one does not pay. Since VLNC is paying no dividend, the money received for the shorted stock bears interest. If the he total short position is smaller than the underlying floorless allows for, the money from additional shorting is all profits, not expenses.
The increased activity in shorting you note on the level II in the 4's (if indeed the interpretation is correct) means that some people with deep pockets think that the stock will indeed go lower and the spiral continue. Of course, Berg standing in the breach and buying those shorted blocks indicates that there is a battle galore between the bulls and the bears. Technically, the bear may have some advantage if their shorting is fully hedged (maybe part of the hedge is buying out of the money calls as well).
If you want to be really Machiavelic about this, about a "theory" that indicates that Berg is leading the charge to lower prices so he can really add a lot to his position? Maybe his time horizon is longer than 12 months, and in the the interim, he may not mind collecting a bunch of shares in the $3 to $6 range.
Good luck out there to all, and Happy and Prosperous New Year to those "qualifying" (G).
Zeev |
