We know now. |
Do not know if they are buys or sells? |
Big trades going through. |
Hmm....in that case no fee is payable?
🤔 |
I did not know my shares could be used in that way, NOT HAPPY. |
Yes wetdream they can. |
Can shares held in nominee accounts be used for shorting without the holders permission? |
IMHO shorting needs to be made more transparent, insider dealing comes to my mind. |
bamboo
Convertibles are uncommon, but you are correct where they do form part of a company's share capital. |
Re the debate on shorts.
Depending on the particular company, and situation, shorts don't always have to buy back. For example, a holder of convertible bonds can use these to repay a stock lender once the bonds are converted to ordinary stock.
It's worth googling this, and naked shorting, for more info. gla |
Interesting debate.
Thanks. 👍 |
 The evil shorters are out to get you! ;-)
Shorting is swings and roundabouts. Alot of people will think of it as illogical and working absolutely terribly in causing huge shareholder value destruction, or at least risk causing this. On the other side though, you have seen the likes of OCDO and PLUS where shorts have been absolutely obliterated and shows just how risky it is being short, particularly crowded shorts.
I'm not saying those are special companies that provide value, but ultimately if the fundamentals stack up, the stock will take out the shorts and rally to where it should be. It won't seem like that alot of the time when you have such a contentious issue floating about, but it is what it is, and we have to adapt accordingly.
As for AMS, the strength in the price continues. There was a little panic type lurch to 320 yesterday - a 5p jump in one go. It's difficult to know where this spike is going to go and the actions of those who are short now, but as I said it's really risky shorting illiquid stocks.
I do short and when I get it wrong, I cover straight away because I prefer to keep losses contained and I'm shorting in small size so no issue covering. The problem with shorting 1%+ of a company with a illiquid stocks like this is, when the market does move against you and the stock keeps climbing, other shorts start blinking and covering and forcing the stock higher, normal buyers then buy more and it all can become a very vicious circle.
I'm watching with interest, but I'm a seller into this spike regardless. Only ever trading this and never hang about when spikes get extended. US is looking abit wobbly and overbought too so another reason to sell into these spikes. I might pop back on at some point in the future if it peeks the curiosity for another trade.
Hope it keeps going up! |
So you lend somebody 1 million shares when they are quoted at £2.50 = £2.5m
They short, and the price falls to £2.00 =£2m
On paper you are losing £0.5m
You get a fee of .0025% = £2,500.
When you report your results, your P&L A/ac has Income of £2,500
Your Balance Sheet is down £500,000
Hey ho.... |
 Yes wetdream it is likely that selling by shorters would influence prices when they sold. But
The shorter has to buy the shares again to complete the trade, which will send the price back up. (Think about why the opposite strategy doesn’t work i.e. I’ll buy loads of shares to drive the price up and then sell them again at a higher price to make a profit. Easy money! No - if buying can drive the price up then selling will equivalently drive it down...)
Also, if you have a genuinely long term perspective you shouldn’t really care about short term price movements anyway. In practice shorting may create a drag on the price if the shorter is successful in adversely affecting sentiment, though over the longer term this will unwind. If you have confidence in your investment it makes total sense to lend your shares to short term speculators for a bit of extra cash. The odds are on your side that the shorting does not imply something wrong with the business over the long term. Most shorting is unprofitable and a lot of it comes from hedging strategies etc. |
More news on its way? |
It all sounds like a crazy game these shorters are playing. My question is what makes AMS stock attractive to them? |
And the institutions, who are supposedly looking after your money, are throwing it down the toilet and polling the chain. |
Trigger16,
You make some fair technical points, but imho they don't apply in the real world.
An individual buyer or seller (of sufficient volume) may surely influence an sp's direction-usually up for the former and down for the latter. Or, as sphere25 suggests, limit the 'natural' direction of an share price by counteracting the way 'the market' is moving it.
Thus if successful, a shorter(who has a negative view of the co./share's prospects) will maximise his profit only when the target share price has fallen as much as possible and he's able to buy back at a much lower price. Out of that 'gain' he then pays back the fee to the holder-who must be considerably worse off? |
wet
On your side. |
The role of a shorter is not to drive down the share price, any more than the role of a buyer is to drive it up. The market sets the price, while individual buyers and sellers can only speculate about where it will go. The holder may not agree with the shorter about the prospects for the share price.
The holder also has a different time horizon to the shorter. By loaning out the shares the holder is committing not to sell them until after the shorter gives them back. Over this longer time period there is no net impact from shorting. The shorter has to buy back the shares to give them back to the holder, in principle reversing any negative impact the initial sale of the shares might have had on the price. |
Sphere25,
Very interesting, thanks.
Personally, I find it puzzling that a holder would lend out a chunk of his holding (ok, for a fee) to a shorter whose role is to drive the value of the share ( and hence his holding) downwards.
How does that make sense? Assuming the fee is below the value drop in share price |
Cheers for the explanation `Sphere`. |
It's illiquid. When stock is held tightly, it only takes small volume to shift stocks like this. That's the problem TT International have at the moment. They will only be able to cover in small amounts each day. Different ball game when it's a BP or Vodafone, easy to cover in size.
The other two shorts will need to significantly increase their short exposure to try and stem the bulls. That's very risky now because they need a profit warning in the very short term (unlikely) or a big market sell off (could get a correction of course) to help them not get squeezed into covering their shorts.
At this rate the stock could trend its way back to 350 and then the highs whilst they sit around watching their losses accumulate.
It's soooooo risky being short illiquid stocks like this. I've already commented on Merian Global on the GYM board. They're giving their stock away cheap there (on a value play) and shorting and getting hammered here in trying to fight the market. They don't know what they're doing.
They'll probably capitulate here just like they have done on GYM. Very poor! |
All very interesting but why does the share price move so much om small volumes. |
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