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Microcap & Penny Stocks : PKGP (Packaging Plus) -- Ignore unavailable to you. Want to Upgrade?

To: John S. Baker who wrote (4226)	6/26/1998 8:34:00 AM
From: TraderGreg	Read Replies (5) \| Respond to of 4783

how can EVERY INVESTOR get their legitimate shares if there is not enough to go around? Obviously, either I am missing something that is clear to everyone else, or I am worried too much about being the unlucky victim...this must come from losing too many times in musical chairs. I'm going to try to tackle this very good question. First, this is a bit like musical chairs but with a twist. Let's say there were 100 shares outstanding...and also a naked short of 100 shares. That would mean there are 200 shares being held in street name but only 100 to draw from for covering. So when the music stops, 100 shares long don't have certs, the shorters must cover right?Remember, the longs are still entitled to their shares(chairs in the circle). They do not lose. The shorters must go to the 100 legitimate shares(chair holders) and bargain. Now, if those legitimate shareholders are savvy, they will demand a higher price and the shorters will pay thru the nose. So, the shareholders get their price and move on. The shorters now have bought the 100 legitimate shares of stock and deliver to the other 100 shares long the certs that are theirs. (The shorters have given those chairs to the 100 legitimate chairs that were denied due to the shorters' actions). Bottom line snapshot after this happens: 100 shares long, 0 shares short Now, what if there were 100 shares outstanding and 200 shares were shorted. That would mean there were 300 shares held long and a 200 share short position. What do the shorters do now? They essentially perform the above described operation TWICE, i.e., they must turnover the legitimate shares two times to obtain the 200 share certs needed to cover the 200 share short position. So, initially you have 300 shares LONG, 200 shares SHORT. 100 of the longs sell out to the shorters who then cover. After the first "turnover", you have 200 shares LONG, 100 shares SHORT. Now, 100 of the longs again sell out to the shorters who then cover. And you wind up with 100 shares LONG, 0 shares SHORT. And of course, now the process of long and short resumes as always with the new stock symbol. The difference from musical chairs is the "losers" who bought shares are not really losers. The shorters must bargain with the other longs(chair holders) and buy a seat back(cover their short positions). The "strongest" of longs give in ultimately, for the right price. BTW, a short position that is double the outstanding is a very rare circumstance, but even that can be overcome depending how "weak" handed the longs are. TG TG