<The effect of a large short position, which drags the price down farther,
is caused by share dilution.>
Rocky, correct me if I am wrong, but when you say 'share dilution,'
you mean that the shares that are shorted essentially are nonexistent (well, they exist, but are just
borrowed) yet artificially increase the float. Although I don't think that
the huge short position is a great harbinger of good fortunes to come
for longs such as myself, it does seem to me that since these 23M shares
are short, they have already been sold, correct?
And if they have already been sold, those sales are
reflected in the current price as sells. When the shorted shares
are covered, they will in turn be reflected in the price as buys.
In other words, there are 23M shares that must be
bought at some point in the future. To me, there are two benefits to
that: 1) As shorts cover, it will help provide support to offset
further price erosion (unless the shorters see 0-1/8 as a good covering price!) and
2) Any 'rally' that forms will be invigorated as shorted shares are
bought if a lot of shorts have stop losses or whatever in
place.
Like I said, I am not thrilled that people on the Street are confident IOM will
go down to the tune of 23M shares, BUT, those shares MUST be
bought back at some time -- the damage is already done?
Cheers,
-MPO |
