That is a very effective technique for stocks that are marginable. The problem with the under $5 stocks is that the vast majority of the shorting that is done is ILLEGAL SHORTING.
The off shore slime that shorts BB stocks don't give a rat's ass whether the stock is in cert form or in a margin/cash account. They simply short it.
You are correct that those with certs can put a temporary squeeze on these off shore slime IF everyone put their shares in cert form. This is because while the short itself is illegal, the person who bought the shares is a LEGITIMATE owner of the stock. When they call for their certs, the short slime has to cover. Here is where theory gets its butt kicked by reality. The short slime can go and buy stock outright or borrow from a friendly MM. The short slimes almost always seem to find shares to borrow from their short slime brethren( who may have a similar arrangement in other stocks with the shorter who needs to borrow).
If difficulty in borrowing or covering occurs, they stall. This is why calls for certs often take mysteriously long amounts of time. If the short slime miss the boat, they then do a very ballsy thing...they wait it out. Why? Because most short squeezes fail, and short slime knows it. Remember, these guys are pros.
Why do the majority of short squeezes fail? Primarily because the price runup isn't the squeeze created by shorters covering, but merely the effects of newbies jumping into the stock because the newbies BELIEVE THERE IS A SQUEEZE. After a while, many get bored, original shareholders can't resist the profit taking and selling INVARIABLY occurs. As the selling continues, short slime smiles and maybe actually shorts some more to help it along. Ultimately, the price comes down. Often it is abrupt
I'm not saying these so called squeezes don't happen. If it passes the duck test, a perceived squeeze and a real squeeze are the same. But most of the time, the slimiest of the shorters invariably wait it out.
Now, if a consortium of ten LONGS started buying up the float and held with the patience of Job, resolutely refusing to sell, and the SEC aggressively pursued short slime for their stall techniques, then the short squeeze would be a smashing success.
And if ifs and buts were candy and nuts...
TG. |
