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[QUOTE]Originally posted by bill1352: [QB] this is a post from the cmkx board about nakes shorting. it takls about companies in the pennies having a hard time getting any extra financing and to do so the deal with companys that will give them money but only for huge amounts of shares which they short before getting and then sell as fast as they can to tank the pps thus making money at both ends. it says the clue is a large spike in volume with a big drop in price does this sound familiar? pccl IMO is a good company and after the financing company quits dumping its share may then release some good pr's which will drive the pps back up but now there are more shares on the market so the increase will not be as much. but this is just my opinion i could easily be wrong Regulatory shortcomings have allowed short selling sharks to ply their trade without sufficient accountability. But just how many sharks swim in these waters? It is impossible to tell since the extent of naked short selling is a matter of conjecture. Companies point to high trading volume and depressed share prices and claim that it is the work of short sellers. They blame brokers and market makers and clearing agencies like the Depository Trust Company. Investors, eager to understand why their holdings continue to plummet, are ready to accept this explanation because, after all, it sounds perfectly plausible. And sometimes it is - but who is telling the truth? Sure, naked short sales might account for deeply depressed stock prices - sometimes. There are, however other logical explanations which would just as easily explain these trading phenomena. The first is also the most obvious: some of these companies have no meaningful value. [b]If a company has few assets, no revenues, no substantial operations, and little realistic expectation of success, it should come as no surprise that its stock trades at pennies, or even a fraction of a cent. High volume accompanying such meager stock prices is hardly an indication that Wall Street has discovered a hidden gem. Nor is it necessarily a sign that the naked shorters are loose. Think logically. If a stock is already trading at pennies, does it make sense to sell short? Just how many shares would the professional short seller have to sell for that exercise to be worthwhile? And if the short seller is a pro, wouldn't he be savvy enough to find a more highly priced stock, where the potential spread and profit is significantly better? Which brings us to a second, more logical explanation for the activity attributed to the short sellers: someone is dumping shares. Is it possible that a bump in trading volume signifies someone selling stock - rather than shorting shares? And are there circumstances where companies might want to avoid acknowledging that shares are being unloaded? You bet there are. Some companies might be reluctant to admit they placed shares in the hands of the sellers who are dumping them on the marketplace. How might stock find its way into the hands of those sellers? There are a variety of ways, as the following indicates: Some shares may have been registered on Forms S-8 and then issued to consultants, employees and attorneys who resell them immediately. Other stock might have been sold to offshore investors under Regulation S, which provides an exemption from registration for shares issued to certain non-U.S. residents. Those offshore shareholders can then resell the shares overseas, immediately. Shareholders who have held stock for at least one year can sell their holdings, without registration, under the exemptions provided by Rule 144. Financiers who provide "equity-based" financing for small companies generally receive large allotments of registered stock in consideration for their investment. These investors may sell those shares short in anticipation of their registration, or simply wait until they have been registered and then liquidate their position. Either way, they would be trading in substantial volume. Then there are PIPES, the popular acronym for private investments in public entities. These private investors receive large numbers of shares in return for providing funding to companies who are desperate for funding. If the PIPE investors are U.S.-based, the shares may be registered. If they are overseas, their shares could qualify for the Reg. S trading exemption. Either way, the investors would be in a position to introduce a large quantity of stock to the public float. Companies who have been diluting their public shareholders by issuing stock to consultants or insiders, or on favorable terms to financing entities, may be loathe to admit that they are the source of a sudden spurt in volume. In that case, naked short sellers make for a convenient scapegoat. The problem for investors, and ultimately for regulators, is to separate those companies that have truly been victimized by naked short selling, from those that have not. Ultimately, the public will have to determine who are the pretenders, and who is telling the truth. [URL=http://www.stockpatrol.com/yours/toc.html]http://www.stockpatrol.com/yours/toc.html[/URL] [/QB][/QUOTE]
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