The Many Mysteries of Shorting:Invalid Short Reports? Why Shorts Pay Over 100% Interest? Etc., Etc.

Discussion in 'Trading' started by darp, Feb 3, 2019.

  1. darp


    Hello, Many consider me the most knowledgeable person on shorting mechanics they know. I don't know anyone that knows more than I do on shorting, yet am totally mystified on many hard to explain facts about the topic. Figured that EliteTrader was good place to find people that know more than I do.

    First I have shorted but rarely and do not now, as options are so much better IMHO to play a stock for a fall, less risk and more profit, but that is another topic. Second I have nothing against shorts if they are honest about it as so many TSLA shorts are. I do however lend stocks to shorts to get the interest they pay.

    The deeper I dig into the short topic the more mysterious things I find. Here is a list of the hard to explain.

    1. Why are short reports (even from sources like NASDAQ) invalid and totally bogus on many if not most stocks? Just one example SAEX which has short squeezed three times in the last 6 month and on one of them it was a super extreme squeeze a 4 bagger in one day on more stock volume that entire the stock count of company, and on no news at all. That was 9-24-2018 4 million shares traded and prior day was 65K. And the short sites said less than 1% was short, yet the lending rate has been over 100% interest for 6 months before that and still to this day. You can see that here

    I also know as had some of the stock and was getting paid over 50% interest (1/2) through the "fully paid lending program" am in at IB and Etrade. On SAEX they said only 20,000 shares were short that day, yet it took 4 million of volume in one day to cover it, and there are only 3 million shares total!! Obviously the fact IB charges 129% interest to lend it and says only 3,000 shares are available today is more accurate and indicates that SAEX is likley 50-60% short not the 17% as Nasdaq claims today or the less than 1% short it claimed on the day it had maybe the biggest short squeeze of any stock in 2018, a 4 bagger on 70 times normal volume. The only reason am documenting this is to prove how invalid and worthless short #s are. After about 2 weeks anyone that has doubted this comes around and realizes this is true.

    One more example, "Hard To Borrow" stock RNC Minerals, RNX.TO or RNKLF on USA has had 70-80% interest rate on it for months. I lend it out and make over $100 a day, and am lent out about 90% on average, this goes on month after month. Sometimes there is no RNC stock to lend even at those rates. Check a chart it has squeezed on news in fact did a 15 bagger in September on very good news, and maybe half that 15 bagger was due to the short squeeze. Now the interest rates are even higher so a 40-50% short position? Maybe that could be about right but short reports say 1.5% is short, 5.34 million out of 388 million million! Absurd

    Look at AIPT which has been over 100% lending interest for over a year. That indicates maybe 50-60% of stock is short, and maybe that is the case, but short reports say tiny 500k shares out of 13 million, less than 5% on the roughly 5th hardest stock to borrow based on interest rate in entire the stock mkt. See how absurd the short reports are. SO THE BIG QUESTION, WHY ARE THE SHORT REPORTS INVALID?

    2. Why to shorts pay over 100% interest to lend stocks? That means that unless it goes to zero in 12 months they will lose money, in fact impossible for them to ever make money as after losing over 100% all all you can make on a short in 100%. AIPT is good example, it has averaged about 106% interest over the last year, I am 90-100% lent out of it on 95% of days in last year. I am getting over 50% interest on it, and the shorts are paying over 100% and the stock is up 5% in last year, the shorts are being slaughtered on it. Why do they not cover? Have they sold naked more shares than there are? They could have shorted SPOT for 0.3% interest and it dropped from $190 to $105 from Sept/Dec. Why pay ruinous interest to short AIPT??? Not easy to answer that. Maybe they have sold more naked than exist, no one would find out unless the stock goes up. Ala movie "The Producers".

    In the case of RNKLF at 80% lend rate week after week, it is a safe company that is profitable and paid off all their debt with one living room sized blast that netted them $50 million AUD in gold at their mine. And it has a billionaire behind them, Eric Sprott who keeps buying the stock. Why pay 80% interest to short a stock that is safe investment and going up?? It helps me they do, as mentioned I make a lot more than $100 a day from those shorts. They are getting killed, paying close to 2% a week in interest, those are mafia like rates. It makes no sense. Does anyone here know why?

    3. Why to the stocks that have high short positions where those positions are reported correctly have such tiny interest rates? Inc TSLA is 22% short, which is likely accurate, maybe the favorite short out there. So huge interest rate right? No, tiny, less than 1%!
    Recent Data
    Fee Available Updated
    0.3 % 1,100,000 2019-02-01 17:45:02

    And that site is accurate, matches IB perfectly.

    Practically nothing makes sense about short interest rates. Can anyone explain this?

    4. This one is more of an observation. On the microcaps that have huge borrow rates (interest rates) like RNKLF and AIPT (and thus huge short position in the real world, ignore the short reports) on sites like Stockhouse and StockTwits there is an army of bashers for those stocks, yet every single one claims they have no position in the stock. Yet they post maybe 5 times a day bashing the stock. If they admitted they were short as the shorts on TSLA do that would be fine, but they seem to have a rule that they must always lie and claim to have nothing to gain by driving the price down. They seem to be paid bashers hired by the real shorts. Does anyone know anything about this?

    5. Lastly the most shorted stocks: Do not have all that high of interest rates on them. HEAR is #1 at 62% short, yet only 19.4% interest rate???

    Ticker Company Exchange ShortInt Float Outstd Industry
    HEAR Turtle Beach Corp Nasdaq 62.25% 10.27M 14.24M Electronic Instruments & Controls
    LCI Lannett Company, Inc. NYSE 55.65% 26.90M 38.95M Biotechnology & Drugs
    PTE PolarityTE Inc Nasdaq 54.29% 9.38M 21.48M Recreational Products
    HIIQ Health Insurance Innovations Nasdaq 52.61% 13.38M 14.41M Insurance (Accident & Health)
    GOGO Gogo Inc Nasdaq 52.31% 56.28M 87.46M Communications Services
    CVNA Carvana Co NYSE 52.20% 35.16M 38.85M Retail (Specialty Non-Apparel)
    AKCA Akcea Therapeutics Inc Nasdaq 51.89% 15.62M 89.26M Biotechnology & Drugs
    OSTK, Inc. Nasdaq 51.23% 24.30M 32.15M Retail (Catalog & Mail Order)

    LCI at 55% of stock short only has borrow rate of 3.4%!!! See how nothing makes sense in the short world?

    Love to hear others ideas especially if you can explain these things.

  2. neke


    Are those rates guaranteed for one year? I don't think so. Even if it is, as the stock plunges, those rates become less as a percentage of your initial investment (if you are long those stocks like SAEX you mentioned): it is 100% of current price not your initial entry price. If you paid $70 to enter SAEX ( I see it traded there in the last one year), the rates now would be mere fraction of what it was then (on your initial investment - which by the way is down more than 90%).
  3. darp


    Thanks neke for answer. Both SAEX and AIPT have averaged over 100% for the last year. For SAEX the price is down a lot and think it is a poor investment and am out of it as AIPT pays almost as much and better biz., and RNKLF is a save biz with solid balance sheet and is about 80% interest. On AIPT it has gone up slightly over last year and again been over 100% lend interest rate the for that year. Interest rate is set each 15 mins, but on AIPT only about 5 days in last year under 100% as you can see

    It varies by broker but some have a floor of $1 whereby it drops below $1 the shorts have to pay same as if it was a dollar. So yes if a stock drops from $10 to $3 the interest paid will drop 70%. In the case of RNKLF being its .50 and started at .09 in Sept, my payments stay about the same.

    Just have inspected the rest of the highest short position stocks and most have tiny borrow rates like FTR at 2% with 40% short, HIIQ at 52% short yet tiny 1.5% interest rate. And stocks they say have 2-5% of short can be over 100% interest rate for a year???? That totally defies the laws of economics and supply and demand.

    On SAEX it seems pro squeezers come in buy the stock on no news force a short squeeze and make a killing. Wish those pros would do the same on RNKLF as it is a better target, so much less risk and news can skyrocket it any day as happened in Sept.
  4. darp


    Are there any regular shorters here? I am not against you, just want to understand the impossible conflict between the size short position in a stock and the short lending interest rates, which defies the laws of economics.
    Last edited: Feb 3, 2019
  5. i remember I shorted one stock with rate of 360%. it cost me a lot overnight. since then, I coded a condition to bypass shorting any stock with rate>10%.
  6. zdreg


    you are hanging out with the wrong class of people.
    SunTrader likes this.
  7. darp


    Thanks for info Trend! You learn fast.
  8. darp


    OK on top of the rest of the irrationality documented above, RNKLF maybe takes the cake for shorts doing something self destructive.

    Date Transaction
    Date Insider Name Ownership
    Type Securities Nature of transaction Volume or Value Price
    Feb 1/19 Jan 29/19 2176423 Ontario Ltd. Direct Ownership Common Shares 10 - Acquisition in the public market 100,000 $0.630
    Feb 1/19 Jan 29/19 Sprott, Eric S. Indirect Ownership Common Shares 10 - Acquisition in the public market 100,000 $0.630
    Feb 1/19 Jan 28/19 2176423 Ontario Ltd. Direct Ownership Common Shares 10 - Acquisition in the public market 400,000 $0.630
    Feb 1/19 Jan 28/19 Sprott, Eric S. Indirect Ownership Common Shares 10 - Acquisition in the public market 400,000 $0.63

    Eric Sprott bot on Friday 1,000,000 on open market. That news helped lite the fire I believe on shorts, and maybe he bot more today. Today RNX.TO and RNKLF (same company) went up 10% and even intraday gapped up on both, the rally was so swift. It does look like short covering.

    Another reason to nominate RNKLF shorts for the market Darwin award. Why pick on a profitable company with strong balance sheet and a billionaire buying it heavily and pay 80% interest to short it?
  9. vanzandt


    You should read my Carvana thread under stocks.
    I was waiting for the squeeze that would take it to the mid to upper $40's. Missed a pile of money as it hit $40 last week. $36 now. It must really suck if they couldn't get it past $40.

    Oh well, good thread. You know way more about the mechanics of this stuff than most.
    darp likes this.
  10. darp


    Thanks. Will look up that thread

    OK have looked it up, 14% of shares short says Yahoo yet tiny 2% interest rate to borrow, typical backwards interest rate.
    Last edited: Feb 4, 2019
    #10     Feb 4, 2019