Re short interests in RSYS. While it's been a lot of fun blaming the MMs for all the evils pertaining to to the static state of RSYS stock (and I've certainly joined in), I don't believe they have much to do with the large outstanding short interests in the stock. I think the problem is once again caused by Intel and/or Tektronix (see my prior message). Also, here, you might also throw in The Twentieth Century Fund.
Take the following facts (not too far from the actual facts). You've sold assets to RSYS for $X million. Instead of instalment payments of cash, you've been paid in 2 million shares of RSYS stock. You've gotten enough shares so that if you divided the number of shares into the selling price of the assets, $10 per share (after they were all sold) would get you the money you were owed plus annual interest of 10%. If the stock goes higher you make out like a bandit. Now, after a couple of years the stock is about $40 per share, and you still own about 1.5 million RSYS shares. On paper, you've made a bloody fortune. However, you own so many shares of stock, you can't unload them all without driving the stock down. (Also, you don't want to hurt the company which is a big customer--or, supplier.) So, you know you can only sell so many shares a year.
To lock in your profit, you sell about one million shares short at (let's say) $40 a share. You keep rolling over the short interests to protect your holdings. In other words, I bet if you checked it out, the short interests are held by either one or more of the major corporate shareholders in RSYS: Intel, Tektronix and/or The Twentieth Century Fund. Again, nothing sinister. They're protecting the profit in their holdings. But the short interests outstanding are a pain in the ass to the rest of us peons, because they are a drag on the market value.
This "hedging" is done all the time by companies who have to deal in commodities. They lock in a future price by selling the futures in the commodities long and short at the same time. RSYS stock in the hands of Intel or Tektronix is just another commodity. These companies have no intention of speculating in the future of RSYS. |
