Scumbria,
I misread when RMBS's split was to occur...thought 3/24 and not 5/24......so much for these companies that announce a split 3 mos before it is to occur, or won't tell you the date at all (ala MGIC). Clearly my suggestion this weekend as to when to short the stock was not the best. To make up for the faux pas, I have enclosed this article fresh off the net re the very same subject. Thought you might find it interesting.
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So Much for the Rambus Short Squeeze
By Herb Greenberg
Senior Columnist
3/20/00 6:30 AM ET
Mun-Dayne:
Rambus (RMBS:Nasdaq - news - boards) had been one of the Nasdaq stocks to short until very recently. Short-sellers borrow stocks then sell the borrowed shares. There were so many shares sold short that the only way shorts could borrow shares was to pay a premium over the stock's price. Usually, it's just the other way around -- shorts receive interest on the stocks they short. The situation involving Rambus set the stock up for the mother of all short squeezes -- or at least a short panic. A short squeeze occurs when the owners of a stock demand that short-sellers return the borrowed stock. Short-sellers are then forced to buy the stock. That causes a rush of buying, which in turn causes prices to rise rapidly, a la Rambus. A panic is, well, just a panic.
Whatever you want to call it, Rambus' stock shot up to 471 from 69 in just 10 weeks. But, as this column often points out, when the shorts are squeezed out, so are the natural buyers as a stock then falls -- and falling is just what Rambus has been doing in recent days. On Friday, it closed at 393 5/8. What's more, my short-selling sources report, the stock is once again borrowable to the point that a small amount of interest is even being paid. ("It's still not normal," one Rambus short says, "but it's vastly different than it was.")
The squeeze itself was triggered by several positive events: Intel's (INTC:Nasdaq - news - boards) statement at the Intel Developers Forum that it's next generation processor, Willamette, would use only Rambus memory; positive statements from several memory manufacturers; excitement over the release of the Sony (SNE:NYSE ADR - news - boards) PlayStation, which uses Rambus memory and, finally, (a drumroll, please) the announcement of a 4-for-1 stock split.
However, according to our short-selling source, "each of these boosters appears to be fading."
His points:
"A little more than a week ago, Microsoft (MSFT:Nasdaq - news - boards) announced the X-Box, its competitor to the Playstation. The X-Box will use an Intel processor. But on a conference call, Microsoft said the X-Box would use double-data-rate (DDR) SDRAM [the fast memory chip standard that is the major upcoming competitor to Rambus]. Coincidentally, the day of the X-Box announcement was the day Rambus chose to announce the stock split. Then again, perhaps it wasn't just a coincidence.
"The X-Box announcement suggests Intel will support DDR SDRAM in 2001. Remember also that at the Intel Developers Forum, when Intel made the Rambus/Willamette announcement, Intel also announced that Foster (the Server version of Willamette) would support DDR SDRAM. " (Also, according to a March 18 article on the Web site TecWeb, Nintendo says it will use DDR SDRAM in its next-generation Dolphin game player.)
"The support of memory manufacturers may not be as solid as some would hope: On Friday, Joe Osha, Merrill Lynch's semiconductor analyst, questioned the rapid acceptance of Rambus technology. He wrote: 'Several days with DRAM manufacturers also left us with little understanding of the current optimism surrounding Rambus.' Osha also wrote, 'We would be surprised to see RDRAM (Rambus DRAM) exceed 10% of the total market in the latter half of 2000.'
"More importantly, consumer's themselves appear not to be excited about RDRAM. The Commercial Times in Taiwan on Friday wrote, 'Sales of [Intel's] 820 motherboard (based on the i820 chipset) have been dismal, and show no signs of picking up.' The 820 is the primary platform used with Rambus memory. The Times went on to write: 'In addition, they [motherboard manufacturers] noted that the failure of Intel's Rambus memory (a feature of the DRAM used in its 820 motherboards) to gain a foothold in the market has also dampened prospective interest in the 820 motherboard.'
"Finally, there is the stock split (which is supposed to be effective around June 14). Usually a positive, right? Perhaps not in this case. Because of its huge run-up, Rambus has become almost 20% of the Philadelphia Semiconductor Index, the SOX, which is a price-weighted index. But on June 14, anyone who mimics the SOX will have to sell three-fourths of their Rambus shares."
In other words, folks, don't count the shorts out yet, as the Rambus Rumble enters Round Two! |
