Last week, about 45M shrs of SYQT changed hands. How many were naked shorters anticipating the insider selloff and/or the upcoming shareholders meeting? How many were the insiders themselves (who according the S3 filed June 11, are selling almost 45M shrs), locking in their profits by shorting against the box before the S/H mtg increases the numbers of authorized shares? If Herb Greenberg is correct and a large number of the 45M shares traded last week were due to naked shorting, I fear history may repeat itself.
Like SYQT, CMYN (a microcap gold mining company) was financed partly through "death spiral" convertible preferred shares. Late last year, due partly to Asian crisis flight to quality, bonds went up and so gold went down against the dollar. As gold dropped, the natural decline in CMYN shares was exacerbated by predatory naked short sellers who smelled blood. They succeeded in driving the stock price below the "Schwartzchild radius" (black hole allusion), the price at which massive conversion would start the death spiral. Now CMYN is delisted and trades on the pink sheets for 1/32. It didn't matter that they had enough cash to operate for 2 years, or that they were rapidly becoming profitable. What mattered was that a combination of natural market forces and shorting drove the stock down to the point where the death spiral kicked in and destroyed the stock in a preferred conversion stampede. If shorters (declared or undeclared - it makes no difference) are trying to do this to SYQT, perhaps they are banking on some negative news at the S/H mtg, or perhaps they just think the 45M share insider sales will do the trick.
Of course, they could be wrong, in which case a massive short squeeze would result. But that's what CMYN holders thought would save them, and needless to say, it didn't.
Thus I conclude, after last week's massive trading, the risk in SYQT has increased substantially. |
