Interesting comments about StockDetective and shorting...
Interesting comment about how stocks get shorted on the StockDdective.com.... here is my opinion, I have talked to a lot of Market Makers and Traders about the volatility and risk in shorting internet and e-commerce related stocks... they said initially they try new stocks that are just starting (such as they did with CMOZ over a week ago when it was trading at $2.00), at this point it is unknown whether a company has anything or whether it is just a promotion... well, the price ran to $5.00 and the shorts ran for cover... they then backed off the play, waiting to feel the situation out... shorts have lost money big time in the e-commerce craze... here are the two factors which relate to the ability of a shorter to beat a stock, 1) number of shares outstanding (and how the trading has been in the last several days) and 2) the potential for news from the company in terms of acquisition, financings, etc. which might drive the price upward at any given moment, making a short position very risky... SO... let's examine CMOZ... 1) share structure, eventhough they show over 40 million shares issued, in actuality, there are only about 11 million shares outstanding, the rest are in escrow.. the second bit of information relates to consolidation and trading pattern... CMOZ has undergone a total consolidation of the float in this range with the price closing exactly the same the last three trading days (on over 3 million shares)... 2) the MMs know what is going on in the company and this is what I have been hearing, two if not more acquisitions being worked on in unique and lucrative e-commerce areas, financing opportunities have been circling in the investment community, PR/IR firm in California are working the phones to bring in buying.... these 3 things add to the potential upside risk... that is why everyday for the last 3 days, the MMs and traders have brought the stock down and then back up to cover their day short... SO... I doubt there is a big short float on this one yet, simply to much upside risk... if CMOZ released some very positive news the price could move very quickly now that the float has thinned and consolidated... and of course the fear in this game, is that just when the shorts are bitting, CMOZ may have something in the bag that could rocket the stock... see, this game isn't like other games such as single product technology stocks, mining plays, etc.... in these types of companies the news is very, very predictable (for example, revenues for sales of one product are predictable within reason, thus the price reflects is revenue pattern with a multiple for risk and this cycles each quarter with release of financial results) but in e-commerce plays, a company can very quickly add on through acquisition, one day a software deal, then a shopping mall, then a gambling site... why do you think Amazon.com trades over 2,000 multiples (I don't think it would have been wise to short this stock under $10.00)... another factor which is fueling this industry is the huge availability of capital for IT deals, I know one company that had 18 different Venture Capital and Banking firms looking to invest in an Information Technology product (it concluded in record time)... this greatly reduces the time to close financing, thus again increases the risk for a shorter.... SO... believe it or not, this play is simply too volatile and risky at this time to short... I think I would wait a bit until the dust settles, at least let them make a few acquisitions, complete their web site, do a fiancing or two, then examine its potential from a shorting perspective... |
