David, so this was a penny stock in which this short squeeze occurred?
Yes
This is a MMs business. Why would anyone stay short knowing there is this drive to register certs, results from drilling, the lawsuit, etc? Do you not think with all the money one would stand to lose these people would keep up with what's going on? There have been plenty
of opportunities to cover with the stock at these depressed levels.
A short squeeze can take on a life of it's own, regardless of fundamentals. Picture this:
o Company A has 40 million shares outstanding, 25 million of which are "free trading" and in the float.
o The shareholders have been "sold" 40 million shares....15 million more than are in the float. The excess shares were "naked" shorted by the MMs, they sold shares that don't exist. They figure they can always keep their foot on the throat of the stock by "walking it down" at will when a buying spree starts. BTW, legitimate MMs do naked short (sell shares that don't exist) occasionally as a normal course of business, buying shares back eventually to keep their books straight.
o All<-----(this is important) the shareholders demand certification of their shares, not putting up with the BS the brokerages give them to discourage them from doing it. The TA keeps a running total of ALL certificates issued. When the "counter" in our hypothetical case hits 25 million, bingo...they quit issuing shares because the DTC won't authorize them to print anymore.
o But there have been 40 million shares requested!! The TA tells the brokerages there are no more shares available! But the brokerage is legally bound to deliver the shares, so they go into the open market and buy them at whatever price they have to pay...period. Guess who they must buy from?...the legitimate shareholders who are sitting on registered certificates. They can practically get they want for the shares because they are scarce as hen's teeth. At this point the stock is not trading on fundamental evaluation!!!
The investment community as a whole could care less about this tiny company as well as the SEC.
Agreed.
What will move the price up is news and news alone.
Not under the scenario I just described above!
When that occurs there will be profit taking and the MMs will sell everyone all they want and keep moving the bid up with a large spread.
Not true...the jig will be up! They won't have any "real" shares to sell and can no longer control the price...the legitimate shareholders with certificates have cornered the market on the shares and the brokerages won't put up with buying "phantom" shares from these bozos.
The ones who bought on the tail end will be underwater almost immediately.
This could happen....kind of like musical chairs with somebody paying the highest price and nobody to sell to. Happens with lots of stocks.
Many of them will panic as more news will not come out everyday and the price will drift down again until there is more news. Unless there is some sensational gold find that makes national headlines there will not be enough interest to sustain the buying necessary for a short squeeze.
Not before 15 million legitimate shares have been purchased from the "good guy" certificate holders for an exorbitant price.
Investing isn't a team sport and plenty who own at lower levels will sell.
They probably will, for the right price.
I am disappointed that the time and resources of the company are being devoted to such an absurd pursuit, it makes me question this investment and the quality of management. They should devote their energy to obtaining financing and getting gold out of the ground.
I agree.
And yes there is a downside to registering the certs, you can't trade your stock.
Not true!!! I'm sitting right here with some certificates. All I have to do is call my broker and he will sell them for me. I then have 3 days to deliver my legitimate shares to him and settle the transaction. If your broker won't do this for you, you need to get another broker. BTW, if you need to sell shares for which you have requested certificates but don't have them yet, all you have to do is cancel the order for the certificates and have your broker sell the shares still on account with him. Your broker should accommodate this situation too...mine does! One more thing...some large brokerages OWN market makers! If they can't or won't get you certificates within 2 weeks I would question their motives.
Dave |
