in defense of the shorts ...
phew! I just read thestreet article. ouch!
something I've been thinking about, as I've watched the shorts mercilessly pound AGPH over the past 8-9 months, and especially in the past week or so.
The shorts are performing an essential and valuable function in the marketplace. It's difficult to watch a company that I'm positive on take such a beating ... and to see paper profits evaporate, and real, paper losses add up. But this is the way the game works.
When someone takes a short position, they're betting the company is selling for more than its future value, just as I've taken a long position on AGPH betting the company is selling for less than its future value.
The shorts on AGPH are looking at the same issues we are:
- PI market
- inlicensed products
- income statement / balance sheet
- cancer products
They're doing their homework, and reaching different conclusions. They're willing to bet their dollars that they're right, and we're wrong.
This is high stakes poker, and with shorts and longs, there's a winner and a loser.
What is the benefit to me as a long? First, it imposes a ruthless but necessary discipline on companies and markets. The markets work better. Second, it forces issues out in the open. It's easy for a person with a long position let their position bias their assessment of the company's reality. (same applies to shorts, btw). And companies themselves are innately biased in the way they look at and present their story. It's human nature.
It's intendant (sp?) upon those of us who are long the stock to identify the issues brought up by the shorts (Eissinger's article is a good starting point) and try to assess them objectively. Not from the standpoint of how can we refute them regardless of the truth, but look at the same data, look at their interpretation, and see if we agree or disagree, on a point by point basis, and in the overall assessment.
It can be a brutal and punishing market for uninformed and unwise decisions. But that's the game we're in. Shorts are playing the same game, too. If they're wrong, they'll pay, and dearly. It's a fair game. Did any of you guys play football in high school or college? Remember what happened when you missed a block? Your quarterback got his head taken off.
I'm still confident of my long decision on AGPH, but the stakes are too high to not attempt to soberly sort through the short's arguments and try to objectively evaluate them ... and weigh them against the bull case.
Peter |
