Post by kranker on Jan 20, 2007 15:39:56 GMT -4
Naked Short sellers are vultures
By Dennis
I asked my broker why I couldn’t naked short and he said that’s left to the big boys. It is a bit inaccurate to use the term naked shorting as it brings up naked puts, naked calls, etc. which are legal and which I also do all the time. Instead, this issue should be referred to as “unsettled trading” which means the buyer doesn’t get what he paid for which should be guaranteed to settle in three days. Definitely illegal.
When a broker sends a confirmation slip, I think it could constitute fraud as they are confirming delivery of something that hasn’t been delivered. Believe it or not, there are a vanishing small minority of genuine OTC companies that are laying off staff and failing because they are being manipulated.
Imagine a scenario where a Microsoft type company is shorted into the pennies because it is in R&D with no revenue and the shorts believe it will dilute at ever lower levels to stay alive.
Instead of going to the market, I’ve treated my business as a private company - I donated salary without taking shares, mortgaged my holdings to buy stock in the pennies and pulled the cert., lent the company money, etc. because I want the investors that believed in us to be rewarded. If someone bets on me and we win, they should get the pay off.
We originally went public through a reverse takeover of a mining shell and most of the initial money came from family and friends (and their family and friends) who I don’t want to screw.
To be honest, I thought that by drying up the float, the shorts would have to cover. I didn’t understand the game was fixed.
It took several years, but we’ve turned the corner and are getting huge contracts, we’re profitable and we don’t need to go to Wall Street and will never do another financing unless it is our choice.
We announced our biggest deal in our existence and I was astonished to see the stock fall 50% the day we announced it (even though the trading volume exceeded the float).
My phone was off the hook with investors calling to say they were buying but wanted to know why the stock was plummeting. Now the SEC is asking us weird questions about revenue recognition.
We announced another huge deal and the stock traded huge volume without going up a penny even though no one with a position above 100,000 shares was selling.
Some days, I get 20 hedge funds calling looking for a placement or to loan insiders money secured by their stock. “Don’t worry, we can lend you x millions of dollars and you don’t have to file insider trading. It doesn’t matter if you never pay us back, the loan is below prime and non recourse”.
Then I had friends and relatives calling telling me their brokers were telling them we were a scam, we were going bankrupt, etc and begging them to sell.
Or, never buy OTC companies even if they are good because the shorts will drive the price down and you can’t fight the OTC conspiracy. Brokers actually told that to my investors.
The coup de gras was when my grandma was distraught because her broker told her that I was a scammer and she needed to sell before the stock went to zero. She didn’t know what to tell the other old ladies in her complex as she had bragged about our huge successes and hadn’t realized I was a stock scammer and I had been lying to her.
She only owned $1000 worth of stock, but it created a huge emotional issue for her in a company I’ve built up for many years privately before going public. It was this incident that made my blood boil.
I’ve intentionally not used my own name because Mark is right - companies shouldn’t complain about being shorted because it brings negative attention.
I know we are naked short because I had my own control position in electronic form. I fought for six months to get my certificate, hearing everything from you can’t pull it without filing insider trading to the company or transfer agent is holding it up. I could see my broker didn’t have even a fraction of my position when I looked at the sheets.
The SEC will not intervene as they consider certificate issues to be controlled by state law of the state where the company was incorporated. Unfortunately, the states don’t have authority over a brokerage out of their state. In other words, if you own an IOU instead of a cert., you have no way of getting your cert.
Mark says to borrow money to go private, but R&D and minimally profitable companies can’t borrow money to go private.
I’m not worried about our case as I see it as an opportunity. Through luck and hard work, we are past the dark times and we are 1 of 100 good companies that were able to survive the attack of Wall Street without going under.
When our profits grow, we will buy back shares and cancel them. We plan to go to a senior exchange this year and we should show up on the SRO list (it doesn’t seem to list OTC companies). We were able to get over the hurdle.
What about the other R&D companies that thought the OTC public markets would provide financing to only discover they bankrupt most start-ups. How much human progress and economic success has been killed? How many investors were right at picking the next Microsoft only to lose everything?
Anyway, a word of advises to anyone reading this. If you are investing rather than trading, ask for your certificate. You get 100% voting rights and your vote isn’t scaled down, you get full dividends (even if the dividend is a private sub instead of cash) and you aren’t at risk if your broker goes bankrupt.
For my company, I am worried about derivative lawsuits because of lack of disclosure about naked shorting even though I have no proof. I had a DTC report where a house came up with a negative position. I called the DTC for an explanation and they said, “that doesn’t happen very often, but it should be gone by next report as it is expensive to go negative”. I asked for a further explanation and I got referred from person to person until no one called me back.
www.wise-investment.info/short-sellers-are-vultures/
By Dennis
I asked my broker why I couldn’t naked short and he said that’s left to the big boys. It is a bit inaccurate to use the term naked shorting as it brings up naked puts, naked calls, etc. which are legal and which I also do all the time. Instead, this issue should be referred to as “unsettled trading” which means the buyer doesn’t get what he paid for which should be guaranteed to settle in three days. Definitely illegal.
When a broker sends a confirmation slip, I think it could constitute fraud as they are confirming delivery of something that hasn’t been delivered. Believe it or not, there are a vanishing small minority of genuine OTC companies that are laying off staff and failing because they are being manipulated.
Imagine a scenario where a Microsoft type company is shorted into the pennies because it is in R&D with no revenue and the shorts believe it will dilute at ever lower levels to stay alive.
Instead of going to the market, I’ve treated my business as a private company - I donated salary without taking shares, mortgaged my holdings to buy stock in the pennies and pulled the cert., lent the company money, etc. because I want the investors that believed in us to be rewarded. If someone bets on me and we win, they should get the pay off.
We originally went public through a reverse takeover of a mining shell and most of the initial money came from family and friends (and their family and friends) who I don’t want to screw.
To be honest, I thought that by drying up the float, the shorts would have to cover. I didn’t understand the game was fixed.
It took several years, but we’ve turned the corner and are getting huge contracts, we’re profitable and we don’t need to go to Wall Street and will never do another financing unless it is our choice.
We announced our biggest deal in our existence and I was astonished to see the stock fall 50% the day we announced it (even though the trading volume exceeded the float).
My phone was off the hook with investors calling to say they were buying but wanted to know why the stock was plummeting. Now the SEC is asking us weird questions about revenue recognition.
We announced another huge deal and the stock traded huge volume without going up a penny even though no one with a position above 100,000 shares was selling.
Some days, I get 20 hedge funds calling looking for a placement or to loan insiders money secured by their stock. “Don’t worry, we can lend you x millions of dollars and you don’t have to file insider trading. It doesn’t matter if you never pay us back, the loan is below prime and non recourse”.
Then I had friends and relatives calling telling me their brokers were telling them we were a scam, we were going bankrupt, etc and begging them to sell.
Or, never buy OTC companies even if they are good because the shorts will drive the price down and you can’t fight the OTC conspiracy. Brokers actually told that to my investors.
The coup de gras was when my grandma was distraught because her broker told her that I was a scammer and she needed to sell before the stock went to zero. She didn’t know what to tell the other old ladies in her complex as she had bragged about our huge successes and hadn’t realized I was a stock scammer and I had been lying to her.
She only owned $1000 worth of stock, but it created a huge emotional issue for her in a company I’ve built up for many years privately before going public. It was this incident that made my blood boil.
I’ve intentionally not used my own name because Mark is right - companies shouldn’t complain about being shorted because it brings negative attention.
I know we are naked short because I had my own control position in electronic form. I fought for six months to get my certificate, hearing everything from you can’t pull it without filing insider trading to the company or transfer agent is holding it up. I could see my broker didn’t have even a fraction of my position when I looked at the sheets.
The SEC will not intervene as they consider certificate issues to be controlled by state law of the state where the company was incorporated. Unfortunately, the states don’t have authority over a brokerage out of their state. In other words, if you own an IOU instead of a cert., you have no way of getting your cert.
Mark says to borrow money to go private, but R&D and minimally profitable companies can’t borrow money to go private.
I’m not worried about our case as I see it as an opportunity. Through luck and hard work, we are past the dark times and we are 1 of 100 good companies that were able to survive the attack of Wall Street without going under.
When our profits grow, we will buy back shares and cancel them. We plan to go to a senior exchange this year and we should show up on the SRO list (it doesn’t seem to list OTC companies). We were able to get over the hurdle.
What about the other R&D companies that thought the OTC public markets would provide financing to only discover they bankrupt most start-ups. How much human progress and economic success has been killed? How many investors were right at picking the next Microsoft only to lose everything?
Anyway, a word of advises to anyone reading this. If you are investing rather than trading, ask for your certificate. You get 100% voting rights and your vote isn’t scaled down, you get full dividends (even if the dividend is a private sub instead of cash) and you aren’t at risk if your broker goes bankrupt.
For my company, I am worried about derivative lawsuits because of lack of disclosure about naked shorting even though I have no proof. I had a DTC report where a house came up with a negative position. I called the DTC for an explanation and they said, “that doesn’t happen very often, but it should be gone by next report as it is expensive to go negative”. I asked for a further explanation and I got referred from person to person until no one called me back.
www.wise-investment.info/short-sellers-are-vultures/