Leo, understood. ALL PLEASE READ: This was sent to me by a friend after I posted the quoted opening statement, which prompted me to rethink my position, PS this is not the first time I have givern thought to calling for my shares.
"In order to sell short, there have to be shares
available to borrow
there are None.....Calling for shares will not be
necessary
the stock is going to be carried on the Bull's
shoulders for quite a while and anyone willing to try
and wrestle the bull will get exactly what they
deserve...."
Yes, I agree that the "Bull's shoulders" will carry the
stock price for awhile. But I might disagree that
there are "no shares available to borrow." The
broker can provide "vapor shares" to borrowers to
sell. The amount of "vapor shares" lendable by
brokers is a collective total, based, I believe, on how
many "real shares" remain on accounts with all
brokers in "streetname" status. Thus, my
understanding is that any shares left in streetname
with a broker are available for use as backing for
shares shortable, albeit at some regulated
percentage.
Even though Mr. D, for example, might *own*
600,000 shares in his account and even though he
might *believe* he holds all rights of use thereof,
nevertheless if he leaves those shares in
streetname, then brokers can permit clients --
including those of other cooperating brokerage firms
-- to "use" Mr. D's shares kind of as collateral and
borrow against his shares, and sell those "borrowed
shares" short, and thereby actually use Mr. D's
shares to work against Mr. D's own self-interest!
Right now, the SI thread "controls" some 4+ Million
shares that are known about. As long as those
shares remain in streetname and not taken
possession of by the SI shareholders of DGIV --
which probably is the case with 99% of all investors
-- then
those shares are utilizable collectively by brokers to
permit their clients to "borrow against" and short-sell
(which is why I spoke about brokers "finding shares"
for clients to short: brokers search for inventories of
DGIV shares *in streetname* across all firms).
BUT...if those same "owners" of 4+Million shares
coordinate and begin extracting and taking
possession of their holdings from their
brokers' accounts, then the
brokers are left with a reduced inventory of "real
shares" to meet regulations, and they then have to
begin contacting "borrowers" to have them cover
their shorts, so they can re-establish compliance
with regulations.
Now, I don't know if there's been organized efforts
by groups of shareholders to manage their holdings
in an effort to fend off short-selling influences on
price, but such would seem possible with the SI
DGIV investors, since they've already shown
cooperation in doing the tally of holdings. I don't
know what the requirements of Market Makers are
regarding short-selling, but, considering estimates of
their short position at 1.4M, If
those short positions are collateralized against the
entire float of 100's of DGIV shareholders that sits
innocently/passively in streetname then SI shareholders can actually dictate when those
Market Makers (and other borrowers) are forced to
cover and even control how much more shorting
those parties could perform in the future.
As the outstanding and float share counts grow and
trading of DGIV shares "matures" with successive
stock splits.
It's sad to see short-sellers making use
of shareholders' real, money-paid holdings to
undermine the value of those owners' shares,
something seemly unnecessary if they could
organize with uncostly counter tactics. Possibly
there just never has been before a convenient
means for hundreds and thousands of usually
invisible, anonymous shareholders to organize. But
now there's the Internet...and SI.
Using IOM as an example, if the shareholders were
organized, they possibly could have coordinated to
take possession of some of their holdings of IOM at
strategic times, for example near the May '96 top,
after the stock price spiked to 56 from 34 in just 4
days, likely as a result of massive short sales on
successive upticks. While the stock price reached
all-time highs to the cheers of the wild throng of
longs, nevertheless what was unappreciated was
that the long shareholders were actually losing
buying power at that point, since at higher prices
their same dollars buy fewer shares (and many
longs were already heavily margined). What the
longs also failed to appreciate was that short-sellers
had the entire *streetname holdings of IOM
shareholders* to use as collateral for their
borrowing intents to sell into the reduced-buying
power of the longs (stock at all-time price high).
Though faced with reduced buying leverage, the
longs nevertheless might have been able to
undermine the shorts' scheme by strategically
seeking control of their own shares from their
brokers, who would then have been confronted with
having their short-customers buy-to-cover, which
effectively would have accomplished using the
shorts to provide the very buying power the longs
lacked and needed to keep the stock price up at
$56...or higher! Alas, they weren't organized to act
and instead watched as the shorts used their own
shares to take control of the price.
"Taking possession" would seem a useful strategy
-- if it can be organized -- whenever buying power of
longs begins to dry up as a stock price rises. It
would seem as simple to implement as calling the
broker to sell short, and simpler than scrambling to
scrape up more funds to gain buying power
sufficient to counter selling pressures. (There must
be a catch somewhere...seems too rational.)
SI-DGIV shareholders do have an advantage,
though, since they *know* that together they
*control* a large percent ownership of the float.
Whether they figure out that passive ownerhsip
alone may not be enough to totally control "the
vertical" and that others can indeed use their very
own shares to depress their stock's price...well, this
might become an issue "down the road."
Thanks, Eric..........
Byron
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