Evening Jim: You couldn't have summed it up better. As each day now passes and longer and stronger hands load up on FNTN, the float has to be growing increasingly tighter.
After seeing what happened Monday, when a number of Internet down and outs that looked technically diabolical in comparison to FNTN, suddenly exploded vertically higher in 400% - 500% rushes, it would appear that given the circumstances currently surrounding this issue, that a 2, 3 or 4 million share buying blitzkrieg would probably produce a similar result or better.
We know there are now roughly six million disclosed shares as fairly solid thread related. I think the figure is probably closer to Eight if you include lurkers and dwellers at Raging Bull with almost 100 posts to date and those who are not willing to disclose, it probably adds up to more than we have thought. There has to be a few million in Institutional hands and so that must bring us fairly close to critical mass.
How close is ground zero? I don't know. But I do know that if FNTN were to become the target of a buying stampede with just a fraction of the mega-gains of the Internet leaders redirected here, the situation could be as potentially explosive as KLB.
To add some further perspective to all this, I am posting some excerpts from a news item from 'thestreet.com' which largely explains much of what has been driving this sector. It makes a lot of sense. With all the Billions being added to the market each week, if a sector suddenly becomes hot and the focus of the whole market, it doesn't matter whether it's Biotech, Agritech, High Tech or Internet, if there are not enough shares to go around, the path of least resistance is up and the periodic relief valves or attempts to create some ballast can be found in stock splits. This is essentially what has been happening to the Internet Leaders and in a more focused sense, is exactly what happened to a number of secondary issues on Monday.
'Incidentally, should FNTN become that focus of the market's or momentum traders' attention, the last thing on their minds will be whether FNTN made a profit or not. They are far more likely to be preoccupied in getting onboard for the ride either short or long term by and buying its future potential, as we all are doing here. If you don't believe me, please explain to me how it is that Crown Books CRWN which lost a staggering $9.82 per share and got hammered all the way down from an all time high of $16 down to .50 cents and yet in just two days can skyrocket to 5.40...On little more than an Internet whim. Now, I've seen everything. Remember: Never, say never...
Here are the excerpts.
Short the Internet? You Must Be Out of Your Mind
By Justin Lahart and Dan Colarusso
Senior Writers
Don't fight the tape. The trend is your friend. Don't try to catch a
falling knife.
There are plenty of axioms on Wall Street. With the major Internet stocks making twofold and threefold gains since June, the one you hear the most these days is: Don't get in front of a runaway train.
There are plenty of good, fundamental reasons for people to go short
Internet stocks. Amazon.com's (AMZN:Nasdaq) market cap, for example, is twice Barnes & Noble's (BKS:NYSE), after all -- and Barnes & Noble, with a price-to-earnings ratio of 57, is hardly undervalued. Amazon doesn't have the E necessary for a P/E, and indeed, of the major pure Internet plays, only Yahoo! (YHOO:Nasdaq), has actually shown earnings over the past year.
If charges aren't taken out, even that isn't true.
Investors took some profits in the group Tuesday, sending Amazon down 17 1/2, or 12.5%, to 122 1/8; Excite (XCIT:Nasdaq) down 10 3/4, or 10%, to 96 1/4; and Yahoo! down 8, or 4%, to 191. Still, nobody's calling a top. "Normally when a stock's down 8 bucks it's a big move, but in the Internet that's like half a point," said Dan Mathisson, head stock trader at D.E. Shaw.
Those who have gone short these stocks -- and short interest was high when it was last tallied on June 24 -- have felt intense pain. Hedge funds that stepped in front of the Internet stocks are rumored to be on the verge of going under. Even though most on the Street think that these stocks will fall to earth someday, they would rather play Russian roulette with five bullets in the chambers than go short now.
"If you're buying this thing on fundamentals, or shorting it on
fundamentals, then you're gonna miss it because they're not trading on
fundamentals," said one tech trader. "There are takeover hopes in them.
There are split hopes -- Yahoo reports Wednesday and they have to say
something. There's a big short squeeze. I think maybe they can come back in once those things are out of the way. Maybe the fundamentals will be the key then."
Or maybe not. Scott Tashman, managing partner of the hedge fund Tashman Equity Partners, thinks that there's so little Internet stock to go around, it's become a seller's market. "My feeling is you have a very unusual commodity in that you only have a handful of companies that you can truly participate in," he said. "You think about the people that want to own this stuff, the bottom line is there are not enough shares to satisfy the demand." The float on five major pure Internet plays -- Yahoo, Amazon, Excite, Lycos (LCOS:Nasdaq) and Infoseek (SEEK:Nasdaq) -- totals 34.1 million shares. By contrast, the float on chewing gum purveyor Wrigley
(WWY:NYSE) is 65.9 million shares.
Tashman contests the notion going around that the move in Internet stocks has been all about individual-investor buying, known as retail. One reason that idea has taken hold is that there are very few big blocks of these companies going by on the tape. Normally that points to retail, but because these stocks trade so thinly, and because it's so dangerous to go short even a little bit, market makers are willing to take on only smaller blocks. And institutions building positions, trying not to move the stocks too much, disguise their orders by buying only in dribs and drabs.
"These stocks wouldn't be moving if there weren't institutional buying," said one stock salesman. "I don't believe that it's only dentists. There's got to be all kinds of buying for stocks to go up this much."
"This is the whole point," said Tashman. "Everybody wants to own these
things and there aren't enough shares to go around. I've never seen
anything so demand-oriented in my life."
That's created a situation where there aren't many governors on how quickly the stocks can climb. "This is the kind of thing that can feed on itself," explained Mathisson. "One of the problems is that they're really hard to borrow. Even market makers have been getting called that they need to watch their short allocations."
Stocks are terrifically hard to short as a result, and the alternative, buying puts, is getting more expensive.
"The put prices are going up," said one Lycos trader on the Pacific
Exchange after the sector had gotten knocked around Tuesday afternoon.
"Maybe they're reflecting the fact that the stock is becoming hard to
borrow."
Options traders often will watch the implied volatilities of at-the-money
calls and puts to determine whether the shares are getting difficult to short. The closer the premium levels, the easier the shares are to borrow, according to Dan Haugh, the president of PTI Securities, a Chicago brokerage firm that specializes in options. "If the exchange floors are having trouble shorting the stock, it will be reflected in the put prices," he said. "They'd be taking on more risk and need to be compensated for it."
Haugh said retail investors might feel the shortage of shares early but floor brokers make a better indicator because their ability to short is generally better.
Near Tuesday's close, the implied volatility on Yahoo! at-the-money options was 96 for the call and the put; in Excite the call volatilities were at 97, while the puts were at 112; Lycos call volatilities were at the 119 level, while the puts were at 126; and Amazon's puts were trading at a 125 volatility while the calls were around 115.
"The only way to play it is to write deep-in-the-money calls," said
Mathisson. Using this strategy, which is safer at this point with August calls than with soon-to-expire Julys, the writer sells calls with a strike price well below the stock's current level. This avoids a high premium on the puts. "But there are risks in that as well," Mathisson added.
Indeed there are. Of the strategy, one Chicago wag cracked: "There are some nice premiums, but that trade looked good last week, too. And the week before, and the week before, and the week before, and the week before."
It isn't any wonder that people on the Street want to wait this one out.
"It's a sign of an unhealthy market that people are just chasing these
stocks," said the salesman. "You just hope you're on board. If you're not, you hope you can buy them cheaper. I'm scared s***less of shorting them."
Interesting stuff
Rgds to all
Wiz |
