TO: Market Surveillance
Vancouver Stock Exchange/Alberta Stock Exchange
So the VSE is investigating a rebound in the share price of Donner on Friday, December 5, while the ASE is investigating trading in NAI. Is this someone's idea of a joke or what? It is not at all unusual to see a spike in the share price of any company just prior to a news release. In fact, it is the very nature of speculative stocks that they rise on speculation.
I suggest that the VSE widen its investigation to look at far more than a minor blip that occurred on one day. Why not take a look at the drop in share price of DML from $2.50 to $1.72 on Tuesday? And take a look at which brokerages did the trading and when they did it. It is indeed curious that there never seems to be a halt anytime share prices drop, no matter how drastically. Surely the VSE would like to offer some protection for the little investor (its bread and butter, so to speak) and give him/her at least a fighting chance of picking up some of the morsels spit out by the big sharks.
One could speculate, especially if one had any kind of cynical bent, that perhaps a few shorting houses (who have been known to call themselves brokerages) got caught Friday and rushed to cover short positions. Of course, all the shorts didn't have time to cover on Friday, without driving the price somewhere close to the stratosphere. So some covering continued on Monday and helped push the stock price up briefly. The shorting then started all over again, forcing the price down.
If the VSE really wishes to investigate something, perhaps it should investigate what has driven the share price of Donner and numerous other solid companies down so much in recent months. Putting Bre-X (which, of course, never did trade on the VSE), the price of gold, seasonal fluctuations, Mohawk hexes and other factors aside, two things have driven the VSE Index down from 1,300 some time ago to just over 600 today. These two things are manipulation and shorting of junior stocks on a massive scale. Manipulators and shorters move the market far more than any rumours, no matter how or where these rumours originate.
Despite drastic drops in share prices, certain brokerages (and I use the word loosely) have made record profits by crippling junior companies and small investors. These shorting houses use my shares and my money and that of other investors to make millions. The more stock prices decline, the more money these vultures make. They don't have to risk a cent, especially since much of the shorting is undeclared, and possibly illegal. The only way the shorting houses can possibly lose is if share prices increase dramatically before the shorters have a chance to cover, a scenario which may have happened for a brief period on Friday, December 5. It is easy to understand why ordinary investors are increasingly reluctant to buy shares in VSE-listed companies, no matter how promising the prospects of these companies. This is grossly unfair to shareholders and companies trying to create value for these shareholders.
In Donner, we are looking at a company which has put assay results and core samples on the table and by all indications, has made a significant discovery at South Voisey's Bay, yet is trading at mere pennies per share. The VSE might wish to investigate how the share price of Donner was "walked" all the way down from a high of $4.30 in October (when it traded as DRZ) to .75 or so a week ago, despite the good news that kept coming from South Voisey's Bay. If one looks at the trading pattern during the past month or so, a suspicious trend becomes apparent. DML (and NAI) would typically open very strong, and continue strong until mid-day or so. Then, as the buying dropped off, the manipulators would step in, piling up fake offers and slamming the bid, forcing the stock to close on a downtick (often substantial and totally out of whack with any kind of normal trading pattern). This happened day after day, with only slight upticks on a couple of days in a three-week period. Manipulators know that many investors, when they check stock prices in the morning, see only that a figure is up or down. If the price is down, many sell, forcing the price down further, and helping the manipulators with their not-so-subtle game.
It is also patently ridiculous that the VSE is in a position to investigate and regulate itself. What is needed is a totally independent regulatory body, similar to the Securities and Exchange Commission in the United States. This body could oversee activities of the VSE, the ASE and other Canadian exchanges. As it stands right now, the small investor has virtually no protection from the predatory activities of manipulators and shorters, who appear to operate with the full sanction (dare one say encouragement) of the VSE.
The VSE (and ASE) can do several things to restore a degree of confidence among traumatized investors. The exchanges might offer incentives, such as a no-fee policy for the purchase of shares, but regular fees for sale of shares. They might also institute what I'm calling a "shorting dividend", to be distributed to non-institutional investors. This dividend would be levied on brokerage houses and would amount to at least 50% of profits made from shorting. After all, it's our money and our shares the shorting houses use to make their fortunes.
It is high time the VSE put its house in order and took a closer look at what forces share prices down (mostly), as well as up. That is if the VSE is to have a future.
Sincerely,
E. C. Coish
cc: The Financial Post
The Globe and Mail
The Vancouver Sun
The Calgary Herald
The Alberta Stock Exchange
Silicon Investor (Donner and Northern Abitibi threads) |
