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Shorting the scams



August 18, 2008 – Comments (2)

18 months on, it's time for another blog post. This time, the topic is scams. Lots of them turn up, usually with a .OB suffix, in the top player's lists, or in their new picks if you get those alerts. Many of them are out and out frauds, pretty obvious from their directors' sordid past histories, outrageous hype in the proxy statements, despicable self-dealing behaviour, etc.

These are easy money in CAPS-land. The really nice thing is you can short them without worrying about how liquid they are, in other words, your CAPS sale is not going to drive the price down! Too bad this is not true in the real world.

Which makes you wonder, if the SEC or some other body actually made it a bit easier to short these dogs, they wouldn't go so high in the first place, and people wouldn't be so badly burned when they crash and burn. Fat chance of that happening though, the tendancy is the opposite.


2 Comments – Post Your Own

#1) On August 18, 2008 at 8:01 PM, russiangambit (28.69) wrote:

Yes, that would be nice. Fidelity (my broker) never has any shares of these frauds to short. But you can buy all you want.

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#2) On August 19, 2008 at 9:42 AM, Gemini846 (34.19) wrote:

Thats the reason they are on the OB or PK to begin with. Any shortsale would effectivly be naked unless you were short against the box to cover.

IE I buy pump.ob at $1.50 it gets pumped to $6 I short to cover at $6 It tanks to $.5 I cover with my long position. I net $5.

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