BANY: Core business growth, exciting affiliations! Message Board

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Microcap & Penny Stocks : BANY: Core business growth, exciting affiliations!

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To: Mike Sawyer who wrote (1501)	3/25/1998 11:50:00 PM
From: Roo	Read Replies (1) of 5847

Sticking gold star firmly on forehead Thanks Mike, and to emphasize your point about company performance: The MMs are professionals and can spot a dog or a rising star from a mile away. They do not naked short for fun, nor do they do it out of spite (as some would have you believe with the common phrase "evil MMs"). When a MM spots a clearly overvalued stock coupled with a clearly underperforming company, they start to see $$$$$ (one of the reasons why reverse splits on the OTC market are like poison for most companies, stock value goes up, but company performance is unchanged). In this type of situation, a naked short can be a very shrewd position to take as it provides instant liquidity while driving the value down, an event that (usually) alerts longs to the fact that there is something fundamentally wrong with the stock and/or company and causes a general re-assessment of the stock's value by all players in the market. In terms of market liquidity, this is not necessarily a bad thing as it is a key element to "balancing" the market. Where the MM runs a serious risk however, is if the naked short position becomes unmanageably large (particularly when sold against a relatively small public float) and individual investors or groups catch wind of the short position. in these cases, the MM can find himself scrambling to cover his position in the face of a cert campaign. The other scenario that poses real risk to the MMs, is if the company performs a surprise turnaround and generates real earnings that start to push the stock value up depite the influx of naked shares. In either case, the MM's position is threatened by decreasing in value as the stock price appreciates, and attempts to cover the position become more risky as other investors, and even daytraders become attracted to the sudden volume spike(s) and end up competing for the legit shares along with the MM. -R

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