ZSUN was oversold by the Market Maker(s) during the April runup in share price and a discrediting campaign was launched in order for the Market Maker(s) to cover their oversold or "Naked" short position. Some covering has occured however the bulk of the immense short position was waiting for the Oct 5 lifting of restrictions. Didn't happen..... According to the NASD the short position in an OTCBB stock does not have to be reported and thus not settled . It can be indefinite in size and duration.
Short selling can be divided into two categories, declared and undeclared. Many dynamic growth companies have been damaged by undeclared short selling. Created by market professionals, the practice consists of creating stock that doesn't exist. It isn't borrowed but created and it creates enormous negative pressure on a stock price.
The Mechanics of undeclared short selling are as follows:
Nonexistent stock is sold short. This nonexistent stock increases a company's float. The nonexistent stock makes it difficult for investors to profit from their risk capital speculations. The short sellers make the profit. The practice hurts the public companies, themselves. It adds massive costs to maintaining a market in a stock and it reduces a company's business options.
The basis of declared short selling is borrowed stock. A short seller provides 50% or more of the value of the stock to his or her broker. This is done in a margin account. The margin protects the broker against any increase in the share price. The broker borrows the stock from a depository trust company. he then sells the stock and adds the money to his client's margin account. Later, the client buys stock (covers) to replace this borrowed stock. The difference between the price the client sold the borrowed stock and the price the client paid to replace the borrowed stock (covered) is the profit or loss from the transaction.
Most declared short players are institutional money managers and fringe group market profesionals, not small capital public investors who seldom participate. Declared short positions risk being squeezed. If the company can double its share price, the short seller will be forced to increase his margin collateral in order to maintain the short position. At such time, the short seller may elect to buy (cover) the stock instead of adding to his margin. This adds to the upward movement of the share price.
Undeclared short sellers don't borrow stock. They don't margin the sale of their short positions. Because they are market insiders they can use various techniques to sell stock that doesn't exist.
Is there money to be made by undeclared short sellers? Estimates are that undeclared short sellers make multi-millions of dollars annually.
Complaints to regulatory agencies haven't stopped the practice of undeclared short selling. However, one way companies can protect themselves is to recommend to shareholders that they take physical delivery of their stock certificates. When physical delivery of stock certificates is demanded by a significant number of shareholders, the
creators of nonexistent stock can be squeezed. The short sellers won't have stock certificates to deliver and thus they will cause losses for them and wil cause them to move their undeclared short activities elsewhere.
Small ``legitimate' companies listed on the Bulletin Board system have no protection against the practice of abusive short-selling by well-capitalized trading firms and individuals attempting to profit from market manipulation rather than company and market fundamentals. By uncoupling a company's stock performance/movement from the company's fundamentals which ordinarily determine its stock performance/movement, abusive short- selling practices significantly influence the ability of such ompanies to maintain favorable shareholder relations and to access capital, (etc.) desperately needed by many such companies to achieve higher levels of growth and other corporate goals. Such practices may also discourage ``excellent' companies that do not qualify for listing on any of the national exchanges, from going public through the Bulletin Board(r) system.
By inhibiting access to capital, abusive short- selling practices frequently determine the destiny of companies listed on the Bulletin Board system.
Professional short sellers and/or Market Makers often target firms that are weak in cash, poorly run, or they believe scandalous in nature. If the company's share price is plummeted to zero or trading is halted ....the short selling profit is immense.
Looks like they picked on the Wrong Company This Time.
EOM. |
