More from Anthony Elgindy...
My take, Dec 27, 2007
I have had an oppurtunity to read many of the replies and see the various issues raised in response to my comments on the "SHO" regulations that purport to protect the market, its investors and it's integrity. I would very much like to spend time debating the various points at length, unfortunately I'm not exactly arguing from a position of strength considering my present state here in prison.
The fact that I was convicted of things that aren't crimes, like releasing truthful and negative information about various companies, and things that did NOT happen, like trading on "inside-info" stolen from the FBI in SEVU, OSIN and PLMD, dont mean very much unless and until the higher Courts agree with me. As a result, Id like to leave all of this in the hands of the Second Circuit Court of Appeals and my 3 judge panel, I suspect that you would probably have more respect for them than you would for anything that I could possibly say about any of this stuff. To engage in any further discussion about the facts, evidence or charges would be a waste of everyone's time. Because, as Abraham Lincoln once said, If I were to be found wrong, " twelve angels swearing that I was right, would make no difference."
As far as the remarks on "SHO" go, being called, stupid, ignorant and even a raving lunatic, obviously means Im on to something. In my own defense I should note that I was a fully licensed and registered NASDAQ market-maker for years and am familiar with the "exemptions" they enjoy and Im familiar with the need for those trading capabilities they enjoy. As a result, I think simply dismissing what Ive said would be a mistake, However, I think that engaging in a post by post, discourse would not only be a mistake but a collosal waste of time. Should I lose my appeal, you will have the satisfaction of believing that you were right along and what Ive said will matter little. If I win my appeal then I guess all bets are off and the dialougue can then begin in earnest, we will see.
What I would like to do however, is address a few of the more important points raised and answer a few questions and leave it like this until the gavel falls one way or the other in the coming year.....
** The most significant issue and the most compelling argument I've seen involves those who have asked me about the rights of those who own stock, their right to protect their property and to loan or not to loan out that property if they so choose.
It is TRUE that as a shareholder you spent your money and now own "something". However, that "something" is a share of ownership of a publicly traded company that trades on a public market that owes a duty to the public.
That market has rules and those rules should apply to everyone and not just a select group. By buying publicly traded shares, you've in essence joined a "game-already-in-progress". Those who issue their shares , who enjoy all the benefits of being able to raise capital, attract investors and the best talent for their ranks have a responsibility that extends FAR beyond the responsibilities to it's shareholders, they also have a responsibility to the market's integrity and a duty and obligation to protect FUTURE shareholders from getting burned by it's current shareholders. Those who issue shares have a responsibility to disclose the good as well as the bad, unfortunately history has shown us, that among the smaller companies that simply does NOT happen.
In exchange for the tremendous benefits that come from being a publicly traded entity, that enjoys instant liquidity, ready access to cash, new investors, unlimited possibilities as well as a well regulated, orderly and efficient market-place in which to buy and sell those shares, those shares can be loaned, hypothecated or borrowed by other market participants. By joining this "game" as a public company and as participants in this game as shareholders you agree to the rules and those rules should make everyone aware that if you buy a share of stock ,that share has strings attached, in exchange for all the benefits that come with ownership, one of those caveats is that every free-trading share that desires to trade in that market-place must know that it can be shorted and that possibility isnt controlled by the whim of some shareholder who wraps his certificate in the American Flag and gets misty over the right he has to "protect his property"... Its a publicly traded share, as sanitary, special and as warm and fuzzy as a 2002 Honda Accord that chooses to run on the California freeways. The rule simply changes what makes no sense and requires "permission" to short a stock, that will never come, into a simple fact of life in our Stock-Markets, that simply isnt up for debate.
As it sits today, the shareholder gets to decide if anyone can bet against the company that he "loves so dearly", and as we have seen since SHO has been in place, they have used it to perpetrate unstoppable fraud and they are devastating other "shareholders" to do it. In the system that you have now, the system that you are all so happy with, it is the company issuers and officers and secret shareholders that are destroying the last shareholders suckered in.. All I am suggesting is that you have a two sided issue, it can only bring in more information and can only benefit everyone by doing so, especially the market's integrity..
By allowing the shares that are freely traded in this "game" to be available to short-sellers, it becomes a much fairer game..If every share that can be shorted is shorted, the longs still outnumber the shorts by a 2 to 1 ratio if not much much more.
Do you not think that if you are to sell “phantom” shares to an unsuspecting investor that the public should have the same access to the non-public information you obtained or is your right to profit through illegal means above that of the purchaser of your naked short?
>> Firt off, my shares aren't "phantom" shares..I am shorting a share of stock that exists, the difference is that the owner of that share who chooses to reap the rewards and benefits of having an instantaneous liquid, regulated, and safe marekt-place to buy and sell those shares CANT stop another market participant from shorting that share by picking up his shares and going home, like he would his Tonka Truck. The issue is all about "permission'...period......
If the share exists and is free-trading and another investor is at risk of buying that share from a scammer who lies to sell that share, that shareholder deserves to have all the information about that stock that is available and by making the issue about "permission" that information isnt forthcoming because there is no financial incentive to go and find the truth. If it cant be borrowed, it usually means its a massive fraud and a giant piece of crap. Thats really the bottom line.....
Now the second part of the question, about unsuspecting investors who buy stock when I have "illegaly obtained info", I never had illegally obtained info, all the info I had was easily obtained by anyone legally, gotta wait for the appeal decision on this to make it final....
While you equally dismiss the “phantom” share ideology I took notice that you also neglected to identify in your thesis why such an investor who puts up the cash has no right to receipt of the goods for which they paid?
>> This is a great question, Ill see if i can answer it with another question. Lets say that you own 1000 shares of ABCD, you pay for it and you then loan it out to a short-seller. That guy then goes out and sells that 1000 shares to someone else, that guy pays and then gets his stock and decides that he too will loan out that 1000 shares, and another short-seller gets that loan and sells a 1000 shares short to yet another person who pays and then makes another loan and on and on and on and on.....
What have we done here ?? We have taken the same 1000 shares and created how many short positions ?? 1, 2, 3, 5, 10, is it endless?? can we go on forever this way ??..If I am short and I borrow 1000 shares and then sell it to someone, that person wants his 1000 shares right ??? Ok..so now he gets it, why does he want it , maybe to loan it out ??? Who knows right ?? Well he can loan it out again can't he ?? My point is that we are talking about buying and selling of "things" that trade and exist in a certain "place" and that "place" has certain rules. the rules of engagement if you will....take out the "permission" requirement and the game becomes fair and level, until then the scammers run the show..........and those who really think of themselves as good Americans should want as fair a playing field as possible... Anway, at least thats what I believe.
Why is it that only the short seller should be provided the right to sell what does not exist and the right to the cash for such a sale so that it can be leveraged elsewhere? Corporations can’t book revenues until the goods are shipped, why should a naked short seller benefit from a sale before delivery is made????
>>>This is one of those BIG LIES that the "Anti-Shorts" like to throw around, The truth is that that short-seller cant benefit in any possible way until he has bought back the shares he has shorted, that money is frozen and untouchable until the short-sale is covered.. Ity makes no difference if I borrowed 1000 shares and sold it or if I was a market-maker who shorted 1000 shares naked to someone,10 seconds before the close, that I never borrowed... The proceeds of those sales cant be used for anything except to rebuy the same exact shares that were sold short.
Furthermore, why does the short seller not have to disclose their positions in a similar fashion as the long shareholder including all trade limitations large investors may encounter?
>>>In a "no permission needed" market that is fair and level I have no problem with disclosing positions that trigger the same requirements on the long side..If someone is short more than 5% of the stock, that is information I as a shareholder would like to know as well....
Under the 5th Amendment of the Constitution every purchaser of property has a right to that property to which they purchase and the right to protect that property. Generations long ago fought with their lives for such rights and it is a right every US citizen including yourself and your family now appreciates. So, who are you to deny others the right to protect their property
because it is not in your or your peers best interests?
>>> Owning a share of stock, like driving a car, owning a car, or even bearing arms comes with certain rules, regulations and special caveats that make our world and our country a safer and happier place to live. I think the right of a future shareholder to know that a company is lying outweighs the right of a shareholder who refuses to loan his shares out so his stock wont get shorted or see any selling pressure other than his own, when he has decided its time for him to exit.. I also think that by eliminating the "permission needed" requirement all investors win in the end and the criminals and scam artists will be back on the run, where they should be.....like I said if a short-seller violates the law, lies about a company or officer he should be prosecuted. If he sells more than exists in the float, he should get sued...
Clearly, an investor with stock ownership in a company has every right to protect that investment to the best of their abilities which includes the right to deny it from being loaned out if it is not in their best interest.
>>>>>You just hit the nail on the HEAD ! Loaning stock out is NOT in the best interest of any shareholder, as a result the "borrow" requirement is actually the "permission is needed" rule to bet against that company, even if that company has been lying and cheating everyone. Since the shorts CANT be involved, its only people like you and the people who you hope to sell your stock to some day in the future who lose the most...What about them, does anyone owe them anything, like maybe the true facts ? And if so, who exactly do you propose will go out and get those facts, and why on earth would they ??
Anyway, I cant possibly address every issue no matter how much Id like to, As I said, Im in a very difficult position since my predicament is not a pretty one. Anyway, I think Reg "SHO" is a sham, its a complete and utter failure and needs to be changed and changed immediately. The market is a joke when I can open the newspaper and see companies that are worthless promoting their shares openly running their values higher and higher on nothing but hot air and nobody able or caring to say a word about any of them........ Anyway, thats it for now.....
Yours Truly,
Anthony Elgindy |
