It cuts both ways Lonnie,
Having been a stockbroker for seven years in the early Eighties, I can speak from experience about the treachery of investing. Scams and scoundrels abound, both in large cap stocks and large institutions
(the Baldwin United/Merrill Lynch episode, Pru-Bache and RE LPs, etc.) to numerous penny stock houses of ill-repute.
I once witnessed a fellow stockbroker execute a short squeeze on a thinly traded, small float stock where, with some speculative good news and a pot of money coupled with ordering out all certificates to the clients, he and a few other stockbrokers ran the stock from $6 to $280. On several occasions the trading desk was calling begging him to sell some stock so they could cover their losses on the short positions.
Additionally, some of the lesser known and less ethical houses, especially in the BB-OTC market, will violate SEC regulations on the amount of stock they can legitimately short and the time period they can hold the short position without having borrowed certificates available to cover the position. I believe this is what Greg might be sensitive about.
If the trading desk of Fahnestock, or a firm like Fahnestock, where to short this stock for its own account in large enough quantities without the corresponding stock certificates available, they could in theory and practice artificially depress the price of the stock. They would be in violation of SEC trading regulations, but the SEC has more to do than to police the trading desks of member firms who in themselves act as policemen of the scam artists in some of these companies. Please remember that the public investor cannot short a BB stock because they not marginable securities, only Market Makers can short these stocks.
Bottom line, it's a two way street. Some professional short sellers will resort to unethical activities like "seeding" reporters with inaccurate tips and hearsay in order to entice the reporter into writing a negative story on the hopes of breaking a scandalous plot to steal the public's hard earned dollars, when in fact the short seller is upside-down on a trade and just needs an opportunity to mitigate his mistake.
Please don't misinterpret what I'm trying to convey, I'm not defending anyone nor chastising anyone, just pointing out that everyone has their own agenda, and many times we do not know what that agenda or the motivation for the agenda is.
--WMG |
