John, Dennis, Zeev, et al. re: trading action
The MM BEST was a seller when the stock was over 20, then dropped the ask to 19 3/4. They also sat below the bid at 19. They do not appear to be net sellers below 20. The large blocks during the day appeared to be retail sellers that had put up 4k or 5k blocks to sell, but were not driving the price down. The traders using the ECN INCA came in to drop the ask, not using large blocks until the end of the day. In fashion typical of Castle Creek (who typically used this ECN, in consort with the ECNs REDI and ARCA), the INCA trader was dropping the ask in spite of getting bought out at the higher price.
My guess is that CC wants to keep the stock within striking range of what they perceive as a sensitive trading point. I wouldn't be surprised to see them just hang out, and then attack the bid during moments of low-volume trading, as well as at the very end of the day in an attempt to 'paint the tape' to get the lowest possible closing price posted.
My conjecture is that CC does not really want to be a net seller of stock down here, but wants to shake loose margin shares whenever possible, so that they and their cohort naked shorts can eventually cover what they shorted in tanking the stock from 30 down to this point.
It's unfortunate that we had two big strikes against us when the market came under pressure Monday and especially Tuesday: first, the lawsuit settlement shares needed to be hedged (by some combination of shorting and writing of puts/calls by Bear Sterns, who then had to hedge their own risk which would be assumed by their writing of puts to the plaintiff shares in escrow, if this was indeed done); second, Castle Creek had perhaps all the 900k warrants to play with (meaning they could take a chance and short against these, hoping to cover the short at lower prices such as where we are now, with the warrants as 'protection' in case the stock reversed on them before they could cover their shorts).
It is quite possible, as a friend suggested, that CC understood the action Bear Sterns would take if the price were to drop precipitously. Namely, CC knew that if they dropped the price, they would force BEST to hedge even more aggressively. Hence, by tanking the stock quickly by aggressive shorting, CC was able to almost triple the amount of selling they could count on: their own 900k warrants, the 950k settlement shares (350k of the lawyers and the 600k of the plaintiffs that are held in escrow), and then the fellow-travellers of CC that coattail on their shorting activity (going naked on the short, hiding inside the skirt of CC and hoping to cover before the game is over; basically they are gambling on downward momentum). We know there was a multitude of naked shorts, both from the intercepted email sent out to hedge funds and timed with the initial attack on the stock, and from the internet postings of shorts whose positions were established coincident with the stock attack (but curiously not the weeks before when the stock was 5-10 points higher). The continued elevated level of disinformational posting by newly created aliases and resident shorts/bears on threads such as yahoo is an indicator that the game is far from over.
How odd to contrast the disinforming posts with the company's production status and continued ramping of production in response to existing POs, together with the acceptance of the product as signalled by companies being in the design phase of products centered around uniquely shaped cells that only Valence can deliver. We'll get through this firestorm in the market; it is not a sin to use forward-looking earnings projections when they can be based on the physical production output of a factory that is just now being rolled out... quite in contrast to the 'dot com' frenzy that in most cases held out little hope that the companies involved could truly ever generate real revenue (be it by means of thin profit margins on sales over the internet, or advertising revenue alone...).
My advice to those invested in this stock has been not to be complacent with the price at any level; until the evidence is more apparent to the investment community at large, and more final products are in the marketplace (products and cells which we currently see at various points along the chain of design, production, and delivery), that with the presence of a large short selling community that would tank the stock on any perceived weakness (in either the stock, trading volume, or market overall) we must be watchful of the games the shorts play.
Now in John's famous words, "let's see how it goes!~"
Regards!~ |
