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By now, you may have heard about a mysterious "problem" in our financial markets that is hurting investors and stifling small companies. That problem is "naked short selling".
Unfortunately, the "naked short selling" problem is not a problem at all. It is a diversion. It is a tactic used by managements and promoters to keep their investors' attention away from the true cause of their portfolio losses.
Where do you look to see who's truly responsible for the condition that so many of these companies find themselves in? You look at the SEC filings. I have investigated scores of companies that have complained about "naked short selling". Supposedly, "naked short selling" keeps companies from raising capital and artificially depresses their share prices. In EACH and EVERY company I have ever examined, I have found that all of these companies have been able to raise capital, some of them have raised tens of millions of dollars in capital in fact, and all of them have share prices that are far above what any reasonable investor would pay for these companies based upon a sound, analytical approach to their financial statements.
Accompany me through the SEC filings of these companies that blame "naked short sellers" for their problems and you will see the same old pattern over and over again:
Companies raise capital.
Companies burn through their capital.
Managements get a handsome compensation package until the money is all gone.
Managements blame outsiders for the depleted condition of the company.
Unfortunately, there are plenty of investors who fall prey to this scandal. They put their money into these derelict companies and then believe the very people who have run their companies into the ground when they seek to cast the blame elsewhere. The very first lesson you should take away from this blog is to never, ever invest your money in a company that would try to blame its problems on "naked short sellers". It is a long time proven formula for identifying a company that is not generating value for its investors.
Unfortunately, the "naked short selling" problem is not a problem at all. It is a diversion. It is a tactic used by managements and promoters to keep their investors' attention away from the true cause of their portfolio losses.
Where do you look to see who's truly responsible for the condition that so many of these companies find themselves in? You look at the SEC filings. I have investigated scores of companies that have complained about "naked short selling". Supposedly, "naked short selling" keeps companies from raising capital and artificially depresses their share prices. In EACH and EVERY company I have ever examined, I have found that all of these companies have been able to raise capital, some of them have raised tens of millions of dollars in capital in fact, and all of them have share prices that are far above what any reasonable investor would pay for these companies based upon a sound, analytical approach to their financial statements.
Accompany me through the SEC filings of these companies that blame "naked short sellers" for their problems and you will see the same old pattern over and over again:
Companies raise capital.
Companies burn through their capital.
Managements get a handsome compensation package until the money is all gone.
Managements blame outsiders for the depleted condition of the company.
Unfortunately, there are plenty of investors who fall prey to this scandal. They put their money into these derelict companies and then believe the very people who have run their companies into the ground when they seek to cast the blame elsewhere. The very first lesson you should take away from this blog is to never, ever invest your money in a company that would try to blame its problems on "naked short sellers". It is a long time proven formula for identifying a company that is not generating value for its investors.
posted by Jimmy B at 8:18 AM
7 Comments:
Jimmy B-we seem to be plowing the same ground. If you care to open a dialogue, I can be reached at lefty.malone@hushmail.com
Nice job, Jimmy.
Check out CMKX as well. Hilarious story. The company doesn't claim a naked short position for the stock, but shareholders estimate it to be in the trillions of shares. Absolutely nuts.
And then there is USXP and their now dismissed lawsuit against the SEC!! Now that's a hoot..
Hey, don't forget HQNT!!!! Invisible buildings and customers, with dividends from spit swapping country cousins with no apparent business but overvalued stock.
Wanna buy Air to Water Machines? Try UCSY. And then there is MLON!!
Jimmy, there is one thing you failed to address, that is the rights of owners to sell their shares when management underperforms and underdelivers. Those who have risked the capital should not be punished by naked short sellers. Naked shorting doesn't hurt management, it hurts existing shareholders. It causes additional risk to capital formation, and capital formation is the foundation of our economy.
Nonsense. "Naked short selling" does not prevent shareholders from liquidating their holdings when management fails.
It may prevent them from liquidating their holdings at inflated prices, but why would expect to be permitted to victimize a new round of misinformed shareholders if your initial assessment of a management teams skills was wrong?
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