Sam,
I can't agree with you that PLMD is a "safe investment" even though I do not think the company officers sanctioned medicare fraud and furthermore I think the possibility that some underlings did so is probably very slim. The main reason for my caution is that we all heard PLMD's reply to the "short case." PLMD sounded sincere. They were believable. They had, in other words, all the right answers.
So why did the short interest double last month? As a trader, when I short, there's very little risk since if the position goes against me I take a small loss and I never hold overnight. But when 80% of the float is shorted, as seems to be the case now, that's not "traders." That's institutional shorting; these are professionals who have a conviction and are holding their position.
These people don't make their decisions based on Yahoo! news releases or on mere rumors. In general, they do NOT speculate. They do deeper research than you and me, and usually they are "right" about the company even when they are "wrong" in the market (for example, many professional shorts got killed shorting Amazon from its IPO to $600. The Kaufmann Fund, for example, lost millions of dollars on AMZN, finally covering in the $200s).
You might be aggravated by the recent downtrend but it's very likely the stock will continue to jolt up and down until the situation is resolved, which could take over a year. I would not be surprised to see PLMD trade over 40 or below 20 (briefly in each case). You'll have plenty of time to sell into strength if your position is too big for comfort; you'll have have many buying opportunities when the shares look cheap.
But to imply that all the current shorts are stupid (i.e. weak links) is to underestimate them and it suggests that your own desire to be "right" unduly influences your analysis. Professionals don't engage in partisanship. They don't think about the people on the other side of their trades because it's not personal with them, it's just business.
As for my brokers and their risk, they will provide a certain number of shares if the shares are available. They know how my account trades and if they thought the risk was great to them, they would simply decrease they number of shares I could short, not deny them outright. The fact is that the recent reported short interest as per www.viwes.com was 8.65 million shares out of a 10.4 million float and 13.2 million shares total when including insider shares. |
