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Non-Tech : Any info about Iomega (IOM)?
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To: w sun who wrote (23625)5/29/1997 9:38:00 AM
From: Michael Coley   of 58324
 
w sun,

>> Would you remind me what are some other companies with substantial shorts?
>> How do these type companies perform historically?
>> Could one draw some conclusion statistically?

Good questions. Basically there are two types of companies with huge short interests:

1) Those where the shorts were right, and
2) Those where the shorts were wrong.

The impact that the huge short interest has is drastically different in those two different types of companies.

In the first case, the price will decline, just somewhat slower than it would have without the short interest. (As they reach their price targets, they will buy to cover, slowing the decline.)

In the second case, the price is subject to rapid surges as the price advances and shorts buy either to limit their losses, because of margin problems, or as their stocks are called in. This is what is called a short squeeze. You can look back to Iomega of last April and May to see what can result when this happens.

The thing to keep in mind about shorts is that they have ALREADY sold, causing dilution and a price drop. When they buy back to cover, it decreases the dilution causing the price to go back up (very similar to what happens when a company does a stock buyback).

As far as some other specific examples (besides IOM of last year), I'll have to let someone else answer that. I'll be looking forward to seeing the examples as well. Does anyone have some?

- Michael Coley
- i1.net
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