Ga Bard, maybe this is where the shares are coming from.<G>
Weekly Thoughts: The Anatomy of A Short Squeeze
Short selling is the sale of borrowed (legal) or nonexistent (illegal)
shares into the market. When the public or brokerage firms sells borrowed
stock in the Nasdaq, the Nasdaq "Short Interest" reports reflect the
public sale of borrowed shares.
The OTCBB market, however, is not required to report "Short Interest".
Some small market makers create nonexistent stock and sell it into the
market. Since they often don't receive major order flows from retail
brokerage firms, they have to sell nonexistent stock in order to
participate in the market and to make money. It's very profitable. It's
tax free. The sale of millions of shares of nonexistent stock usually
destroys a healthy market order and even destroys any public company.
Only the SEC has the power to end this kind of practice by suing these
market makers who are illegal to sell nonexistent stock or issues a new
regulation requiring all market makers and brokerage firms to report
"Short Interest" in the OTCBB market just like the Nasdaq.
A short squeeze is an attempt to force the sellers of nonexistent stock to
buy issued shares. When the short seller buys the stock, it's called
"covering". Attempts to squeeze the short sellers is a battle between
David against Goliath. The short squeezers are David. Some market makers
are Goliath. It's a battle involving millions of dollars when the short
sellers lose.
Some small market makers are regular sellers. One of the short firms is a
public company. According to its filings with the SEC, their last
quarterly 10-Q shows their assets as $800 million. They have a $34
billion, yes that's billion short position. This means that for every
dollar in assets they own, they are short $42.50. If you had the same
risk level, you would be bankrupt.
To prevent your own shares from borrowed by some market maker or brokerage
firm against your position on a stock, the easiest way is to put Good Till
Canceled (GTC) sell order after purchasing a stock. Let's say you have
bought 2,000 shares ABC stock at $0.50 per share. Then you place a GTC
sell order for 2,000 shares at $2. Thus, your brokerage firm often
doesn't lend your shares out. You can always change the order to sell a
price which you wish. To stop the illegal sell of nonexistent stock, the
best way is to lobby the SEC for a new regulation on how the OTCBB market
would be operated.
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