Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Shorting stocks: Broken stocks - Analysis -- Ignore unavailable to you. Want to Upgrade?

To: xcr600 who wrote (2240)	4/24/1999 2:23:00 AM
From: chester lee	Read Replies (1) \| Respond to of 2506

XRC, I think the large spread is a result of the recent reverse split. The prior 1/16 or 1/8 spread is now multiplied by 60. The spread will narrow. Give it a few days. My 2 cents regarding small oil exploration companies: 1. Information is tough to come by and even tougher to verify. This makes for easy manipulation and jerky price action. 2. Success is a long short, akin to wildcating, where its bust or boom. There are several challenges, of which the first is find the oil and having the geological/seismic data confirm the findings. Then they have to extract the oil, which usually isn't in their expertise. Usually joint venture partners come in and infuse cash for a large stake of the reserves. Then they have to worry about available transportation so that the discovered and pumped oil and be bought to market and sold. Pipelines are best, but they are expensive to build, as well as time consuming. Barrel and trucks are inefficient. 3. Cash is rare and quickly consumed. There is never enough. A typical scenario would be to run out of cash, do private placements for convertible preferred shares, dilution occurs and the float grows. Stock price falls and investors lose money and interest. Companies tease investors with frequent news releases of additional drilling, new wells, big projections of potential reserves, reverse split takes the stock price above $5, more private placements, etc. until the market cap is below the amount even a private placement buyer wouldn't touch. It's probably a safe short, but I haven't look at CHARD in any specific terms. The thing to look out for is the manipulation that is sure to follow. Do you know their cash position?? If it's low, then I suspect they did the reverse split to accommodate a financing deal, probably a private placement toxic convertible. We can only hope. chester