A lot of people think shorting juniors naked is hooey. In fact it is the oldest trick in the book, most often practiced by promoters! When a guy would buy a property in the old days off a prospector he would promise the guy 4% commish and get the prospector 50,000 shares or thereabouts. Sometimes 100K. Then the promoter would get 400,000 free shares off the company he would sell the property to, and a promotional fee. He would then get on the blower and sell shares with as many as 10 phones working at once from his boiler room.
He would watch the drilling shrewdly, confident that in time they would run out of steam. If they did not appear to be losing ground, he would bribe a driller or two, to dump core, or miss on purpose. When that happened he would sell more aggressively, all the while saying it was only a bump in the road, that he was confident they would come up with more.. but then often circumstance allowed more misses on step out and the oversold condition started to take hold, driven by well placed rumours. Sometimes in less than a week the former hot drilling play went straight south. The promoter had sold all of his 400K shares at steadily riding prices and perhaps twice as many again that he never even owned. Delivery? Not that anyone would demand it, but he could afford to now pick them up for delivery at 1/10 the price he had got for the shares. We could call it "promotional short selling". This was the way most CDN drilling plays were managed for the past 100 years. The fix was in before the first drill turned. It was going to go up and most assuredly it was going to come down. You could bank on it. 90% of the investing public never caught on to what the real game was. The biggest risk was that there might be a mine found and the shares would shoot up and stay there. Now he was in trouble. If that happened these guys had to leave town for a while.
Guys even tried that on me a while back. As late as the nineties. When I averred I wanted a finder's fee for the property, they got mad. If I got a finder's fee, then they would not be able to as you cannot have two fees. What they wanted was the free shares in order to promote the market and make money.
There is some efficacy to giving a shrewd promoter free shares if they can come up with a rising stock price. The only danger is what do you do once the max price has been reached. Stocks don't go up forever. But the promoter knows that to maintain a high price you have to have not only a real discovery, but also a deal where the discovery can be exploited. Just a story that you are going to take the resource and exploit in house does not work unless there is oodles of smart money waiting in the wings.. like about 50 million dollars.
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