Candle stick, with all due respect, you have been asking questions faster than people can answer them, and you seem dissatisfied with the answers you do get. I'm not an expert at explaining this stuff, but this is what I can tell you:
If PNY is a penny stock, and shorter A wants to short it into the ground, and market maker X decides to go along with it, flooding the market with nonexistant shares, here are the possible results:
1. PNY gets clobbered into oblivion and Shorter A makes a killing (and MM X as well).
2. Shorter A covers after the stock drops to nearly nothing, but still makes a killing.
3. Long investors buy up the float and request certs, until there simply is no inventory to be had. OOPS, looks like market maker X needs to start buying to replace that inventory - because he did a very naughty thing, selling what wasn't his to sell. Whether or not he can force Shorter A to cooperate (shorter A could flee the country) and buy back is irrelevant. The MM is responsible to buy back the shares that didn't exist to begin with.
4. The investors sit back and do nothing, or cannot buy up the float, and the company lingers at a fraction of what it's trading price should be, and the MMs and shorters milk it for all it's worth, bouncing the price up and down. Check out NPEC - I believe that stock fits the pattern. I was lucky to break even on that stock - I had to time my trades with the MM games to day trade back to a break-even point. |
