Post by jcline on Dec 16, 2005 14:15:14 GMT -4
STOCKGATE TODAY
An online newspaper reporting the issues of Securities Fraud
Travelzoo reacquaints itself with SHO Threshold List – December 16,2005
David Patch
For most of this past year Travelzoo (NASDAQ; TZOO) had been a dominant force on the Regulation SHO Threshold Security List published by the NASDAQ. Travelzoo was trading with a significant level of settlement failures on the books and qualified for higher restrictions on short sales. As Travelzoo competed to survive against highfliers Google (NASDAQ; GOOG) and Yahoo (NASDAQ: YHOO) the market trading in the stock was being controlled by trade executions failing to settlement properly.
As Internet provider Google skyrocketed to over $400.00/share from an IPO price of less than $100/share, and gracefully never tarnished the Regulation SHO threshold list, Travelzoo was seeing just the opposite.
Research into the problems surrounding the stock trading of Travelzoo highlighted a continuous level of excessive settlement failures dating back to at least October 2004. NASDAQ records indicate that as early as October 7, 2004 Travelzoo qualified for the NASD’s version of Regulation SHO [Rule 11830] and had qualified for either Rule 11830 or Regulation SHO consecutively from October 2004 to late this past summer.
Since first qualifying for Rule 11830 in October 2004, Travelzoo continued to climb from a $54.00 stock in October to over $94.00/share upon achieving Reg. SHO status. Yet, once achieving the SHO status the stock has taken a swift decline in value culminating with a near 80% market cap loss by the time the stock was removed from the qualifications of Reg. SHO.
According to the Securities and Exchange Commission, Regulation SHO has been a success as it relates to Travelzoo and other issuers like Travelzoo. The Commission Staff has identified that SHO forced the reduction of fails in the security and eventually resulted in another successful issuer removed from the perils represented by the SHO Threshold Security list.
The mere fact that the market loss to investors in this stock was a paltry 80% is irrelevant. Regulation SHO and the ‘grandfather clause’ prevented upward stock volatility and that is an important market metric to the SEC. The SEC cannot be forcing those that sold what did not exist to suffer a loss and Regulation SHO would protect against that. It was working!
One would now think that Travelzoo was safe from further market abuses as the Industry pirates have left the scuttled ship in search of another leading to more rewarding returns. Not so quick!
Recently, Travelzoo once again graced the presence of the Regulation SHO Threshold Security list amongst a sudden improvement in stock performance. The timeline to excessive trading without settlement dates back exactly to the day Travelzoo began to trade positively in the market.
During a 7-day period that ended the month of November 2005, Travelzoo traded in a tight range around $21.00/share. A far cry from the near $100/share offering price in January 2005. Then on December 1, 2005 the stock traded 3X previous day volume and traded up 10% for the day. The $21.71 stock on November 30 closed December 1 at $23.59 on 1.1 Million shares exchanging hands.
To qualify for Regulation SHO, Travelzoo requires a minimum of 80,000 shares identified on record at the DTCC as having settlement failure status. The settlement status must persist for 5 consecutive days without falling below minimum required levels. Travelzoo suddenly re-qualified.
By December 6, 2005 Travelzoo had peaked to $26.05 at closing. On December 13, 2005 Travelzoo closed out the day at $25.37 but more importantly, Travelzoo showed up on the threshold security list for a second stint. Backtracking from December 13 to the first trade date that resulted in the excessive fails that qualified this stock for SHO, the trades that resulted in the trip point were executed on December 1, 2005. The exact day Travelzoo showed positive upward momentum.
Under the guidelines of Regulation SHO, these fails have no requirement for immediate settlement because the fails took place prior to the company being listed on the Regulation SHO Threshold Security List. The fails also took place at a value between $21.79 and $24.59 representing the trading range on December 1, 2005.
As has been the pattern to date these fails will remain a fail, under the protection of the Securities and Exchange Commission, until they can be covered for a profit. Those that executed these failed trades will most notably work the stocks to drive investors out below the short sale levels or will sit on these fails until a profit level is achieved. In either case, the SEC has their backs. How many backs are uncertain, as the SEC will not disclose the level of fails in a threshold security.
One thing we know for sure. Those that attempted to control the stock price of Travelzoo on December 1, 2005, a form of stock manipulation, will be provided all the opportunity necessary to get out of jail for free. The selling to control the stock rise, regardless of it leading to a fail, is ‘grandfathered’.
Consider that if these were trades executed by market makers, these Wall Street players will be afforded the opportunity to take their bona-fide market making exemption and use it to protect their strategic trading of the house account. The fails can exist for extended durations, which contradict bona-fide market making, and not a single regulator will take notice. Bona-Fide Market making became strategic trading and yet exemptions will be exemptions.
The Securities and Exchange Commission staff considers Regulation SHO a complete success and have stated so publicly and in a memo directed to me by the staff.
I can only question how companies like Travelzoo can spend such a tremendous percentage of time on the list and can repeatedly come on and off the list when so few companies, by percentage, are ever listed in the first place. How is it that a company like Travelzoo can be removed from the Threshold Security list slowly over a 9-month period in time, and during an 80% reduction in Market Capitalization, and yet can regain threshold status instantly during a period of 10% improvement in stock value?
One thing is for sure; the SEC is certainly not looking out for the best interests of the investors of Travelzoo or the Company itself.
So who is getting the benefit of this trading dilemma?
For more on this issue please visit the Host site at www.investigatethesec.com .
Copyright 2005
An online newspaper reporting the issues of Securities Fraud
Travelzoo reacquaints itself with SHO Threshold List – December 16,2005
David Patch
For most of this past year Travelzoo (NASDAQ; TZOO) had been a dominant force on the Regulation SHO Threshold Security List published by the NASDAQ. Travelzoo was trading with a significant level of settlement failures on the books and qualified for higher restrictions on short sales. As Travelzoo competed to survive against highfliers Google (NASDAQ; GOOG) and Yahoo (NASDAQ: YHOO) the market trading in the stock was being controlled by trade executions failing to settlement properly.
As Internet provider Google skyrocketed to over $400.00/share from an IPO price of less than $100/share, and gracefully never tarnished the Regulation SHO threshold list, Travelzoo was seeing just the opposite.
Research into the problems surrounding the stock trading of Travelzoo highlighted a continuous level of excessive settlement failures dating back to at least October 2004. NASDAQ records indicate that as early as October 7, 2004 Travelzoo qualified for the NASD’s version of Regulation SHO [Rule 11830] and had qualified for either Rule 11830 or Regulation SHO consecutively from October 2004 to late this past summer.
Since first qualifying for Rule 11830 in October 2004, Travelzoo continued to climb from a $54.00 stock in October to over $94.00/share upon achieving Reg. SHO status. Yet, once achieving the SHO status the stock has taken a swift decline in value culminating with a near 80% market cap loss by the time the stock was removed from the qualifications of Reg. SHO.
According to the Securities and Exchange Commission, Regulation SHO has been a success as it relates to Travelzoo and other issuers like Travelzoo. The Commission Staff has identified that SHO forced the reduction of fails in the security and eventually resulted in another successful issuer removed from the perils represented by the SHO Threshold Security list.
The mere fact that the market loss to investors in this stock was a paltry 80% is irrelevant. Regulation SHO and the ‘grandfather clause’ prevented upward stock volatility and that is an important market metric to the SEC. The SEC cannot be forcing those that sold what did not exist to suffer a loss and Regulation SHO would protect against that. It was working!
One would now think that Travelzoo was safe from further market abuses as the Industry pirates have left the scuttled ship in search of another leading to more rewarding returns. Not so quick!
Recently, Travelzoo once again graced the presence of the Regulation SHO Threshold Security list amongst a sudden improvement in stock performance. The timeline to excessive trading without settlement dates back exactly to the day Travelzoo began to trade positively in the market.
During a 7-day period that ended the month of November 2005, Travelzoo traded in a tight range around $21.00/share. A far cry from the near $100/share offering price in January 2005. Then on December 1, 2005 the stock traded 3X previous day volume and traded up 10% for the day. The $21.71 stock on November 30 closed December 1 at $23.59 on 1.1 Million shares exchanging hands.
To qualify for Regulation SHO, Travelzoo requires a minimum of 80,000 shares identified on record at the DTCC as having settlement failure status. The settlement status must persist for 5 consecutive days without falling below minimum required levels. Travelzoo suddenly re-qualified.
By December 6, 2005 Travelzoo had peaked to $26.05 at closing. On December 13, 2005 Travelzoo closed out the day at $25.37 but more importantly, Travelzoo showed up on the threshold security list for a second stint. Backtracking from December 13 to the first trade date that resulted in the excessive fails that qualified this stock for SHO, the trades that resulted in the trip point were executed on December 1, 2005. The exact day Travelzoo showed positive upward momentum.
Under the guidelines of Regulation SHO, these fails have no requirement for immediate settlement because the fails took place prior to the company being listed on the Regulation SHO Threshold Security List. The fails also took place at a value between $21.79 and $24.59 representing the trading range on December 1, 2005.
As has been the pattern to date these fails will remain a fail, under the protection of the Securities and Exchange Commission, until they can be covered for a profit. Those that executed these failed trades will most notably work the stocks to drive investors out below the short sale levels or will sit on these fails until a profit level is achieved. In either case, the SEC has their backs. How many backs are uncertain, as the SEC will not disclose the level of fails in a threshold security.
One thing we know for sure. Those that attempted to control the stock price of Travelzoo on December 1, 2005, a form of stock manipulation, will be provided all the opportunity necessary to get out of jail for free. The selling to control the stock rise, regardless of it leading to a fail, is ‘grandfathered’.
Consider that if these were trades executed by market makers, these Wall Street players will be afforded the opportunity to take their bona-fide market making exemption and use it to protect their strategic trading of the house account. The fails can exist for extended durations, which contradict bona-fide market making, and not a single regulator will take notice. Bona-Fide Market making became strategic trading and yet exemptions will be exemptions.
The Securities and Exchange Commission staff considers Regulation SHO a complete success and have stated so publicly and in a memo directed to me by the staff.
I can only question how companies like Travelzoo can spend such a tremendous percentage of time on the list and can repeatedly come on and off the list when so few companies, by percentage, are ever listed in the first place. How is it that a company like Travelzoo can be removed from the Threshold Security list slowly over a 9-month period in time, and during an 80% reduction in Market Capitalization, and yet can regain threshold status instantly during a period of 10% improvement in stock value?
One thing is for sure; the SEC is certainly not looking out for the best interests of the investors of Travelzoo or the Company itself.
So who is getting the benefit of this trading dilemma?
For more on this issue please visit the Host site at www.investigatethesec.com .
Copyright 2005