Dilemma for the naked shorts.
Now to the next points in your post:
I have been told that now it is no longer possible to borrow Valence stock for shorting purposes. An investor now cannot short Valence. So the above investor now can no longer short additional Valence stock. His only fire power remaining is to sell his long stock at the bid. Half of his firing power is gone.
But wait....that also means that now someone with a newly acquired position of VLNC
common stock can not short additional Valence stock to hedge his new stock position!
And what if a CC is currently not fully hedged? If they cannot short they are open to the
same market risks as the rest of us with a major portion of their stock holdings. So ........?
Since September 1, the nature of the selling seems to have changed… Whereas we once saw the sellers attack the price with significant volume, mostly now we see a delaying action, and aside from a few fairly low volume attacks, selling that seems to be at the ask and attempting to keep the stock price from climbing.
Take Friday's action; there were two attacks, one in the morning, and one only three minutes before the close. Aside from this, most of the trading was at the ask, by only one market maker, the same one I believe has been handling CC's orders. There were usually only two other MMs on the ask with small orders, and the rest were sitting about a quarter point higher. They knew if the one MM stopped selling, the price would jump a bit. I estimate that half the volume sold on Friday, came from this one MM. Over and over this MM would sell all the shares they had on the ask, but then 're-load' and place more shares out at the same ask price. This went on all day.
I think the a lot of the selling is coming from CC. The other big players who were selling have pretty much stopped selling, but almost certainly still have significant short positions. We haven't seen the tape action indicating that the clients of these MMs who were selling heavily, have gone back and started buying.
CC could be selling because they want to hedge some of the shares they got when they converted. Incidentally, it would be interesting to find out if CC converted more shares last week, after the Monday conversion. John Curtis, perhaps a call to the transfer agent is warranted.
Your information on the inavailability of stock to short is interesting… although I find that somewhat hard to believe. I would think that there would be at least 3-4 million shares available to short. So if this is true, then it could put a lot of pressure on the shorters when the stock starts to take off.
I believe the longs left in the stock have seen the worst, and aren't about to sell now. The only thing keeping the stock down appears to be CC selling some amount below their daily quota, to hedge some of their position. Longs are absorbing this volume, but aren't trying to bid the price up until CC eases off.
But of course, if we get news, then this will attract new players to the stock. Also recent statements by the company officials to analysts and other investors appears to be getting more and more positive. The implication is that while they can't predict the first big PO, that we are very close, and could see one any day now. Then the shorts will just fuel the rise in the stock.
Paul
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