Hi Winzer5
What you describe is also known as a hedge. Variations exist in other financial markets like convertible bonds/shares, warrants, equity options, other options and commodities.
The opposite is when you hold financial instruments either long or short with no off-setting "guarantee" hedge, you are exposed or nake. For example in options, you can write naked puts (exposed short).
As long as the "(possibly future underwriters)" are participants in the PP then they have no risk (zero) on their shorts, even if FDA approval comes during the financing.
There are full hedges, half hedges or variations.
Full hedge is when you know you will receive via subscription, for example, 100 shares at 1.00 at x date. And short exactly 100 shares at any price above 1.00+commish. Your profit is hedged or locked in.
There are situations when "breaking one of the legs" of the hedge is advantageous that allows you to participate in a bull or bear run.
Half hedges in comparison is when you know you will receive, for example, 100 shares at 1.00 at x date. And short exactly 50 shares at any price above 1.00+commish. Your profit is half hedged or partially locked in. You continue to be exposed or naked for the other half, make or lose money.
In DMX's toxic financing, we have evidence that the PP participants must have some guarantee of PP participation, short millions of shares for weeks, then sign off the PP participation in the future, take delivery of PP shares and deliver to cover their shorts.
Anyways, I remain DMX long and naked. Blush. |
