Zeev, I agree that short interest may sometimes help limit price swings. However, shorting greatly accelerated downward pressure for Valence, first with Bear Stearns and the settlement shares, then with additional efforts by others in conjunction with circulation of the false rumors that Valence, rather than HET division of T&B had lost Qualcomm's contract and that Valence's chief of technology had just left to join another company etc. It has therefore been my contention that there were two significant "temporary" factors, unrelated to the company's state of affairs, that drove the price down much farther than the overall market coditions, and that it is a steal a these prices.
The shorting therefore widened the price range in this case as it triggered massive margin selling(by design). When the next positive news is announced, the large short interest should accelerate the move upward, as low-priced shares disappear and the shorts are "captives" such that they are obligated to eventually purchase Valence shares to replace those they borrowed to sell in advance. The large remaining quantity implies that they have failed to drive the price down low enough to cover where they had hoped, and will likely have to cover at current prices or higher.
Also, doesn't a large short interest imply that there is ultimately less stock available to buy? Might not 4 million+ shares be considered a significant "shortage" of available stock rather than a non-significant event as you describe it? |
