Attention Munchkins! Esquire Magazine writes on AREM!: "FEELING THE LOVE Some stocks can get way
too friendly.
Just when you thought
companies don't do
enough to win your love,
one of them steps up to
woo you.
Take Pre-Paid Legal, a
sort of HMO for legal help.
Because of the
controversial way it
accounts for commissions,
some think Pre-Paid's
profits appear larger than
they actually are.
Naturally, short sellers are
buzzing around the
company, selling borrowed
shares in the hope that
the price tanks so they can
repay the loan with shares
bought for less. Most
companies ignore their
critics, figuring a well-run
business best silences the
skeptics. But not Pre-Paid:
The company sent out a
memo advising longs to
call their brokers and
create a short squeeze,
which would send the stock
up and shake out the
shorts. No luck. In May,
Pre-Paid's stock fell 26
percent the day after it
acknowledged receiving an
SEC letter criticizing its
accounting.
Then there's the strange
case of AremisSoft. Short
sellers were all over the
software company after it
announced a seemingly
dubious $37.5 million
contract from Bulgaria.
AremisSoft fired back with
a 3,000-word press
release refuting the
rumors and asked
investors to report anyone
spreading the bad talk.
Despite this, trading in
AremisSoft was halted on
May 17 as published
reports indicated the
Bulgarian deal was worth
less than $4 million, with
shares down steeply when
trading resumed.
Not surprisingly, the louder
a company protests its
short sellers, the more
likely the shorts are right.
So when a company starts
publishing the addresses
of those shorting your
stock and advises you to
toilet-paper their trees,
your next move is
obvious. —K. K.
esquire.com (see right hand column) |
