Naked Short Selling

Discussion in 'Wall St. News' started by flytiger, Mar 29, 2007.

  1. I wanted to put this here so it gets its own play away from all the other threads. If you're serious about understanding this, it's all here. This is serious piece properly referenced, about a very serious topic. If you ran a company, and had these guys on you, you'd get it in a hurry.

    Maybe someone could link it properly to ET for me. Thanks.
  2. From the article/Houston Law Review:

    "However, despite its growing coverage in the mainstream press and its cult-like status on the internet, naked short selling has remained beyond the awareness of most American investors.
    Part of the reason that this growing problem remained relatively unknown until recently is that it involves highly technical financial concepts and an alphabet soup of quasi-govermental corporations."

    That about says it all in a nutshell.

    The complexity of the concept, makes it easy for those who are out to conflate short selling and naked short selling, to give the false impression that those who object to naked short selling, are attempting to eliminate short selling, a vital instrument of the market. Add to that, those who are calling attention to naked short selling, a method by which someone sells something they don't own, are almost always characterized as sore losers in the mainstream press. That tactic, as intended, makes it extremely difficult to isolate the real argument. That the agencies who are responsible for policing the illegal practice of naked short selling have adamantly avoided their responsibility makes it appear, to the uninitiated, that there's really nothing wrong.

    In light of the weekly scandals that involve this administration, one hopes that it may not be long until this issue, rises to a level of greater scrutiny.
  3. I wonder why they don't have this problem in London... after all they don't require you to borrow shorts for intraday...
    and there is no down tick rule.
  4. if the system is concerned about short selling, they should increase the margin requirements imo.
  5. I don't know why this is hard. Read the doc. We are concerned about "naked short selling", and it's consequences. Christian explains the effects rather adequately.

    The negative rebate for OSTK was 100%. That was confirmed by two sources. IF 100% neg rebate was not a deterrent, then what good would higher margin be?

    Remember the size and cost of the bet makes it extremely critical to get the stock to drop immediately. That is what the Gradiant lawsuits by Overstock are about. It is not about NSS, but about loading the research; about shorting, legally and illegally, the hell out of a company while you are designing the research and paying a third party to release it on your say so.

    Now, the SEC has dismissed the civil complaint against Gradiant , which, combined with Aguirre, the GAO and Judiciary inquiries, should raise all sorts of red flags, since several employees at Gradiant swore statements that implicated Gradiant in such a scheme. They dismissed Gradiant, but no one said these five lied under oath. They again delivered their testimony in Washington.

    I'm making a bet that Cox, the consummate politician, will resign pretty quickly. I can't believe he wants to wave to us off the bridge of the Titantic.
  6. i will read this closer, sorry.
  7. The company can simply buy back stock issued [with a profit] to take advantage of the short sellers, in the worse case they buy back 100% delist themselves and leave the naked shorts... well... naked.
  8. I didn't think many people would take the time reading the doc. There are no Cliff Notes folks. This is the real world. Read the Goddamn thing. Highlight it.

    1. Why buy back what somebody counterfeited? Why don't we, the United States, go to Macau and buy back the 24mm that the N. Koreans counterfeited with real dollars?

    2. In smaller companies, those trying to get going, their equity, where Wall St. makes the majority of its commissions, is their currency. Take a company featured in the Bloomberg piece, Sedona Corp. The stock went from ten to .13, all along making progress and signing software deals, to the point where they are now approaching profitablity. They have diluted themselves to the third power by having to borrow money at lower prices, even thought it is now "clean " money. Software needs service. How many deals did they lose because a prospect thought the compnay wouldn't be around to service the software? This is one example of the many ways attacked companies are injured. By the way. .13 wasnt' low enough. One firm tried to fake a .09 trade with four bids at .13. We knew they were naked short under .20 large, and with this sleight of hand, they would scare retail into dumping a load into the market, and they could cover their new shorts, and some old ones. This was a major house. We caught them and turned it over to the SEC. Now, we have to count on them to do right. The lower level guys will bust their ass, but once it gets up to the top, I have little hope.

    3. Say I tender for all the shares. How many do I buy? When I own the float, what next? The SEC and DTCC won't help me. They've proven that time and time again. One company issued a "holders only " certifcate as a dividend. It showed up in an account, held by broker.

    4. If I'm naked short or short OSTK at $45, and he tenders at $18, I just buy in all day long at 18. There is never a squeeze, unless he tenders higher then 45. They win again.

    I know many real world examples that are too cumbersome to explain in this forum. Trust me on this, they always win, because they game the system in so many ways.

    We haven't even talked about Milberg Weiss. They were elbow to elbow with Rocker and the boys all along. Roddy Boyd at the Post said they did their own "research" and class action sued being right 100% of the time. Why wouldn't they be just a hedge fund? Justice is saying they bribed people to bring class action lawsuits against target companies on the heels of hedge fund bear raids, which of course lined their pockets, but forced the shares even lower. Are these the markets you want to trade in?

    Cramer helped Patrick Byrne in a big way. He has confirmed what the man has been saying all along.
  9. Okay, I'll take everything you say at face value and agree (hypothetically). "They" (hedge funds, Weiss, Congress to toss in one more I know for a fact) game the system. It is not my game but I want to play so I need to know the rules of the "game" and so does the cos that wish to participate.

    You know the rules are made up as we go along and are different for every player, it is a free for all, oh well. Skinned knees and empty wallets, oh well. If the financial markets were a wheel, they are re-invented every day with anyone with an imagination.

    There'll always be the self-righteuos to save me from myself, no thanks.
  10. The world according to Tiger: naked shorts always win.

    Do you actually believe any of the nonsense statements that you make?

    Of course you will ignore this and all rational arguments which expose your ignorance; thats fine, this is simply here for the thread. Consider it a "cliff note".

    Notice that he says "trust me on this". This is good insight into the workings of his mind. It shows us that he thinks that he is letting us in on some privelaged information, a nugget of wisdom that we ought to accept as a great gift from someone who knows better.
    #10     Mar 31, 2007