Naked Shorting, Tool of the Financial Elite
This is a (great) guest post by @dometech, who actually has an account now... just hasn't done a thing with it. He asked to borrow my audience again and I of course obliged. Part one will be posted here and part two on his own page, hopefully, tomorrow.
As I am old enough to have my bumbling with technology cue an in-audience laughtrack I thought it best to have @mitthradiumn post this for me, though I do intend on figuring out this platform eventually. I also want to thank all the people who left feedback or upvotes on my previous post, thank you.
Also pertaining to my age; my primary experience and knowledge base is related to traditional investing, so my articles will most likely be as well.
I would like to rant about my personal ass-hole-cat of a pet peeve regarding the pathetic lack of response from our regulatory authorities in taking action against organized shorts with massive naked shorting campaigns.
To put what I'm about to write about into context: I have been substantially invested, for both the expected +% ROI and a genuine belief in the company and its product, which I go into more detail here, a company called Nexoptic (NXO on TSX).nIt has been thoroughly and fairly documented that NXO was the victim of a well organized short-take down last April when the stock had soared to the 3.76 level from, I believe, somewhere in 1.80 range previous market close. There were 2 hatchet smear articles published on Seeking Alpha at that time by "Keubiko" and "Grumpy Bear" which were exhaustive short themed articles attacking NXO that turned out to be the leading edge of a massive short attack which was supported by paid bashers on these various stock analysis sites.
The remnants of that attack are still felt today with the share price barely above 1 dollar despite virtually everything stated in those articles having been proven false. Alsothere has been tremendous progress in the company with patent approval, the progression of their cell phone lens development and announcements regarding partnering with high end developers like New Deal Design, Synapse etc. Their board has been revamped and tremendously strengthened with the likes of Arch Meredith and Karen "Fleming".
There is strong suggestive evidence that the Anson Group was involved in this attack and they are notorious for this activity, having been sued previously by Nobilis Health and Catalyst. I spent some time reviewing some of the articles they used to undermine Nobilis (surprise, also published on Seeking Alpha) and it reads exactly like the "Grumpy Bear" article.
And on top of this there is grossly manipulative trading behavior where there were thousands of stacked 100 and 200 share buy/sell bids. No one in their right mind buys and sells a 1 dollar stock at 100 share allotments given that you will automatically be down a minimum of 10% given the brokerage fees. Don't forget the regular spoofing of large sell orders that appeared, disappeared, and reappeared during the height of the short and distort campaign some which were in excess of 100,000 at one price and/or split over multiple prices, which has occurred of late.
This is clearly illegal behavior that you would have to be blind to ignore, but our regulatory authorities refuse to deal with it, and often, cause it.
The Hedge funds involved are like the bullies in the playground stealing little kids lunch money, with the small retail investor taking over the child's role. The trading houses and banks are active participants reaping millions in brokerage fees.
When these large entities decide to short a small junior with a market cap of less than 500 million: they do not stand a chance. It is going down regardless of how good their tech, people or execution are.
What we are talking about is organized crime at the highest levels with the collusion of the banks, brokerage houses and our regulatory authorities. Is this behavior really any different or less corrosive to society than drug running, prostitution, or other activities that are prosecuted to the full extent of the law?
Naked Shorting is the tool of the elite shorter where the trading house will let the fund sell shares that DO NOT EXIST. What could be more illegal than that? Where there are no shares available to back the short, they will just make up a sell order, backed by nothing. This is counterfeiting shares. Say every NXO shareholder miraculously wound up holding their shares, steadfastly refusing to sell. All shares issued by the company are not trading, being held close to the chest, but there could STILL be massive amounts of selling and buying of counterfeit shares that have been pumped into circulation by naked shorts. Talk about having the deck stacked against you.
When does it end? Are we doomed to carry this cancer diagnosis of shortitis forevermore? It ends when revenue is generated and the path forward to massive growth in that revenue is so compelling that they move on to greener pastures to repeat the whole procedure on some other poor company.
I cannot understand the passivity of attitude that accompanies this by most investors. I believe most people just don't understand the process, and there is this underlying belief that it must be legal or " they" could not get away with it.
What we are talking about here is the privilege of the elite to steal with impunity right in front of the noses of the regulators, if not shoving twenties up their nostrils.
Let's hope that Nexoptic will grow up to be one nasty, massive, tattooed mother with a long memory. To my way of thinking these short entities whose elite members rub shoulders with the elite of the world, are no better than common thugs. In a perfect world they would be prosecuted and spend a fair number of years incarcerated, broker fee naturally adding to the sentence, worrying about the interest rate on their commissary account.
I am substantially invested in Nexoptic and stand to gain from its success. You should not invest unless prepared to sustain a total loss of the money you have invested plus any commission or other transaction charges.