Post by funado on Oct 2, 2005 6:40:18 GMT -6
I found this at marketmillionaires.com/showthread.php?t=28&page=6&pp=15, and it apparently was brought there from proboards27.
It looks like it's from someone named PennyWrangler. I think I've heard the name before, but can't place it.
It's old (5/27/2004), but I had never seen it before and found it to be very good. Some of it doesn't jive with present numbers (like it assumes a maximum o/s of 500 billion), but it still lays out a very reasonable scenario -- to my way of thinking anyway.
Thought it might make for some good Sunday afternoon reading.
Enjoy!
Short Sqeeze
--------------------------------------------------------------------------------
Squeeze of the Century
a PennyWrangler theory
The following is my own personal theory regarding the nature and purpose of gThe Casavant Maneuverh. Both the facts that we have at hand and the ghearsayh that is considered to be plausible fit neatly into the scenario presented below. The scenario itself is also plausible on its own.
Assumption: UC wishes to take CMKX private. He is tired of the stupid games with MMs trying to make money by shorting his company into oblivion. He is tired of worrying about hostile takeovers. He is tired of worrying about SEC regulations, reporting requirements, and other impediments to doing business.
He wants to build a diamond mining company, period. He doesnft want all of these annoying distractions keeping him from realizing his dream. As CEO of a private company, UC can focus on his passion rather than the distractions.
Assumption: UC cares about his investors because hefs a nice guy. He wants for us to have a positive experience with him and his company. Hefs not simply wanting to get rid of us; he wants us to be happy about our investing experience with his company. This is part of his legacy; a step towards making his name immortal. This is also expediant and practical; we will form a pool of wealthy people that will have great fondness for him. Such friends can prove extraordinarily valuable.
I believe that UC has set a bear trap to end all bear traps to achieve his goals.
Assumption: There are 500B shares in the o/s. This is the worst case possibility; if the o/s is smaller, the numbers only get better.
Assumption: UC owns or controls 85% of all shares that are available. Note I did not say 85% of the o/s.
Assumption: There are approximately one trillion counterfeit shares in the market due to naked shorting.
Setting up the Chess Board
This means that the total number of shares available to Urban is 1.5T (1.5 Trillion). He owns or controls 85% of these shares. This means he controls 1.275T shares. Some were given to him by the company, but most he bought on the open market.
You can think of his 1.275T shares like this. One trillion of these shares are counterfeit. 275B of them are real. The real ones could have been given to him by his company, or he could have bought them. Probably the company ggaveh them to him as a form of compensation.
Urban had to purchase the 1T counterfeit shares in the open market. He may have laundered these shares by having others buy them for him. These people could have either transfered ownership of these shares to Urban, or they could be continuing to hold them. These people are tightly bound to Urban and will do what he wants them to do. The laundering was needed to keep the MMs from knowing who was REALLY buying all of the counterfeit shares that they were selling, so that they would not become suspicious.
1T shares at 0.0001 would cost $100M. Urban might have raised this money in any number of ways, including pooling family assets. However, I believe there was another source of funds for this part of the project.
En Passant - The Unexpected Move
I believe that CMKX has a clandestine operating open pit diamond mine.
Reportedly there is considerable glacial overburden associated with the Forte a la Corne kimberlite pipes. Glaciers pushed across the tops of the pipes, gsmearingh out kimberlite across the surface of the land as they moved. If that kimberlite were diamondiferous, that would mean that diamonds were available with a relatively low cost surface mining technique.
CMKX could have been selling these diamonds to raise the funds necessary to purchase 1T counterfeit shares. More precisely, these funds were used to trick the MMs into creating these shares out of thin air. Urban created demand for shares that the MMs were only too happy to supply. I believe this is the explanation for the huge volume numbers wefve been seeing for the past few months. Naked shorters have been gdumpingh and Urban has been buying.
The MMs were hoping to short CMKX into bankrupcy, thereby eliminating their need to cover their short positions. With CMKX bankrupt, they would simply pocket the money they made by selling the counterfeit shares and walk away. They would not even have to pay taxes on this money because the short positions would be open indefinitely! This is their standard modus operandi.
IMO, it was Urbanfs goal to cause the creation of at least 2X the o/s in counterfeit shares. The greater the multiplier, the greater the leverage he can later apply to the MMs.
The Payoff - Creating Powerful Friends
Assumption: Urbanfs goal is to offer legitimate shareholders a tender offer of at least $1 / share.
Once Urban has finished acquiring the necessary number of counterfeit shares, his next move will be to force the MMs to cover their short positions. One powerful way to accomplish his is to offer a dividend.
A holder of a short stock position must pay the original stock holder (from whom he borrowed shares to sell short) any dividend offered. This is hard enough when the dividend is cash; it is considerably more painful when the dividend is in the form of stock. And if the stock being paid is the stock of a privately held company, then it is physically impossible for the short position holder to pay the dividend. He simply must cover.
In the case of naked short positions, the shareholder being borrowed from does not exist. However, the short seller has created shares that were not issued by the company that were sold to a shareholder who expects to be paid his dividend. The naked shorter must pay this dividend, because the company will not. Therefore a dividend will squeeze both naked and legitimate short positions.
I believe Urban will announce a dividend for CIM as we have heard before. This will start the naked short covering panic. The pps will begin to rise, and it will rise quickly.
Toppling the King - Checkmate
Now comes the move that topples the Market Makerfs king and effectively ends the game.
The Market Makers are sweating bullets as the pps runs higher and higher. When the pps hits 0.60, Urban begins selling his 1T counterfeit shares. MMs buy these gladly. UC continues selling, which pushes the pps down. Once the pps hits 0.50, Urban stops selling. When it has run back up to 0.60 again, he starts selling again. And so on until all 1T counterfeit shares are sold. This is how Urban knows EXACTLY what the pps will be during this time window. He will be in control of the price.
Note that this is not price manipulation. There is no collusion taking place here. This is simply a shareholder making a personal choice of when to sell and when not to sell. This just happens to control the price range for a time as a side effect because he is selling such a large number of shares.
Once Urban has completed his sale of all 1T counterfeir shares for an average price of 0.55 / share, Urban will have $550B. Game over.
The Aftermath - Tears and Triumph
The MMs have deep wounds and they go off to lick them and sulk. They must ultimately accept that Urban let them off light. He gave them the shares they needed at a relative discount, thereby sparing their financial lives. Urban could have held out for a lot more and blown them away. Instead, he gave them enough of a beating to show them how much he appreciates their efforts to destroy his company. The MMs are not going to ever be Urbans friends, but they respect him now.
Urban does not need to be buddies with the MMs. Once his company is private, MMs are no longer part of the equation. He can afford to hurt them. But there is no point in pushing the pps to $10 either and ruining these guys entirely. If he did that, they would be back later to play hard ball. These people are affiliated with global organized crime syndicates that are, in many ways, more powerful than any government on Earth today. It is unwise to push them too far. They will likely forgive an honorable beating as retribution for them trying to kill Urbanfs company. Honor among theives.
Next, Urban will present a gtender offerh to the holders of legitimate shares in the company. The offer is for $1 / share for the entire o/s. Urban owns or controls 275B shares, so he will pay himself $275B, quite a tidy sum. We hold the remaining 225B shares; we get the rest.
This leaves CMKX as a private company that has at least $275B + $50B, or something in the neighborhood of $300B dollars. This is more than enough to fully develop the properties to which CMKX has the mineral rights.
Now Casavant Mining can focus on becoming a world diamond power to challenge De Beers at their own level. Urban has achieved his dream and made his loyal investors rich.
All is well. ;-)
It looks like it's from someone named PennyWrangler. I think I've heard the name before, but can't place it.
It's old (5/27/2004), but I had never seen it before and found it to be very good. Some of it doesn't jive with present numbers (like it assumes a maximum o/s of 500 billion), but it still lays out a very reasonable scenario -- to my way of thinking anyway.
Thought it might make for some good Sunday afternoon reading.
Enjoy!
Short Sqeeze
--------------------------------------------------------------------------------
Squeeze of the Century
a PennyWrangler theory
The following is my own personal theory regarding the nature and purpose of gThe Casavant Maneuverh. Both the facts that we have at hand and the ghearsayh that is considered to be plausible fit neatly into the scenario presented below. The scenario itself is also plausible on its own.
Assumption: UC wishes to take CMKX private. He is tired of the stupid games with MMs trying to make money by shorting his company into oblivion. He is tired of worrying about hostile takeovers. He is tired of worrying about SEC regulations, reporting requirements, and other impediments to doing business.
He wants to build a diamond mining company, period. He doesnft want all of these annoying distractions keeping him from realizing his dream. As CEO of a private company, UC can focus on his passion rather than the distractions.
Assumption: UC cares about his investors because hefs a nice guy. He wants for us to have a positive experience with him and his company. Hefs not simply wanting to get rid of us; he wants us to be happy about our investing experience with his company. This is part of his legacy; a step towards making his name immortal. This is also expediant and practical; we will form a pool of wealthy people that will have great fondness for him. Such friends can prove extraordinarily valuable.
I believe that UC has set a bear trap to end all bear traps to achieve his goals.
Assumption: There are 500B shares in the o/s. This is the worst case possibility; if the o/s is smaller, the numbers only get better.
Assumption: UC owns or controls 85% of all shares that are available. Note I did not say 85% of the o/s.
Assumption: There are approximately one trillion counterfeit shares in the market due to naked shorting.
Setting up the Chess Board
This means that the total number of shares available to Urban is 1.5T (1.5 Trillion). He owns or controls 85% of these shares. This means he controls 1.275T shares. Some were given to him by the company, but most he bought on the open market.
You can think of his 1.275T shares like this. One trillion of these shares are counterfeit. 275B of them are real. The real ones could have been given to him by his company, or he could have bought them. Probably the company ggaveh them to him as a form of compensation.
Urban had to purchase the 1T counterfeit shares in the open market. He may have laundered these shares by having others buy them for him. These people could have either transfered ownership of these shares to Urban, or they could be continuing to hold them. These people are tightly bound to Urban and will do what he wants them to do. The laundering was needed to keep the MMs from knowing who was REALLY buying all of the counterfeit shares that they were selling, so that they would not become suspicious.
1T shares at 0.0001 would cost $100M. Urban might have raised this money in any number of ways, including pooling family assets. However, I believe there was another source of funds for this part of the project.
En Passant - The Unexpected Move
I believe that CMKX has a clandestine operating open pit diamond mine.
Reportedly there is considerable glacial overburden associated with the Forte a la Corne kimberlite pipes. Glaciers pushed across the tops of the pipes, gsmearingh out kimberlite across the surface of the land as they moved. If that kimberlite were diamondiferous, that would mean that diamonds were available with a relatively low cost surface mining technique.
CMKX could have been selling these diamonds to raise the funds necessary to purchase 1T counterfeit shares. More precisely, these funds were used to trick the MMs into creating these shares out of thin air. Urban created demand for shares that the MMs were only too happy to supply. I believe this is the explanation for the huge volume numbers wefve been seeing for the past few months. Naked shorters have been gdumpingh and Urban has been buying.
The MMs were hoping to short CMKX into bankrupcy, thereby eliminating their need to cover their short positions. With CMKX bankrupt, they would simply pocket the money they made by selling the counterfeit shares and walk away. They would not even have to pay taxes on this money because the short positions would be open indefinitely! This is their standard modus operandi.
IMO, it was Urbanfs goal to cause the creation of at least 2X the o/s in counterfeit shares. The greater the multiplier, the greater the leverage he can later apply to the MMs.
The Payoff - Creating Powerful Friends
Assumption: Urbanfs goal is to offer legitimate shareholders a tender offer of at least $1 / share.
Once Urban has finished acquiring the necessary number of counterfeit shares, his next move will be to force the MMs to cover their short positions. One powerful way to accomplish his is to offer a dividend.
A holder of a short stock position must pay the original stock holder (from whom he borrowed shares to sell short) any dividend offered. This is hard enough when the dividend is cash; it is considerably more painful when the dividend is in the form of stock. And if the stock being paid is the stock of a privately held company, then it is physically impossible for the short position holder to pay the dividend. He simply must cover.
In the case of naked short positions, the shareholder being borrowed from does not exist. However, the short seller has created shares that were not issued by the company that were sold to a shareholder who expects to be paid his dividend. The naked shorter must pay this dividend, because the company will not. Therefore a dividend will squeeze both naked and legitimate short positions.
I believe Urban will announce a dividend for CIM as we have heard before. This will start the naked short covering panic. The pps will begin to rise, and it will rise quickly.
Toppling the King - Checkmate
Now comes the move that topples the Market Makerfs king and effectively ends the game.
The Market Makers are sweating bullets as the pps runs higher and higher. When the pps hits 0.60, Urban begins selling his 1T counterfeit shares. MMs buy these gladly. UC continues selling, which pushes the pps down. Once the pps hits 0.50, Urban stops selling. When it has run back up to 0.60 again, he starts selling again. And so on until all 1T counterfeit shares are sold. This is how Urban knows EXACTLY what the pps will be during this time window. He will be in control of the price.
Note that this is not price manipulation. There is no collusion taking place here. This is simply a shareholder making a personal choice of when to sell and when not to sell. This just happens to control the price range for a time as a side effect because he is selling such a large number of shares.
Once Urban has completed his sale of all 1T counterfeir shares for an average price of 0.55 / share, Urban will have $550B. Game over.
The Aftermath - Tears and Triumph
The MMs have deep wounds and they go off to lick them and sulk. They must ultimately accept that Urban let them off light. He gave them the shares they needed at a relative discount, thereby sparing their financial lives. Urban could have held out for a lot more and blown them away. Instead, he gave them enough of a beating to show them how much he appreciates their efforts to destroy his company. The MMs are not going to ever be Urbans friends, but they respect him now.
Urban does not need to be buddies with the MMs. Once his company is private, MMs are no longer part of the equation. He can afford to hurt them. But there is no point in pushing the pps to $10 either and ruining these guys entirely. If he did that, they would be back later to play hard ball. These people are affiliated with global organized crime syndicates that are, in many ways, more powerful than any government on Earth today. It is unwise to push them too far. They will likely forgive an honorable beating as retribution for them trying to kill Urbanfs company. Honor among theives.
Next, Urban will present a gtender offerh to the holders of legitimate shares in the company. The offer is for $1 / share for the entire o/s. Urban owns or controls 275B shares, so he will pay himself $275B, quite a tidy sum. We hold the remaining 225B shares; we get the rest.
This leaves CMKX as a private company that has at least $275B + $50B, or something in the neighborhood of $300B dollars. This is more than enough to fully develop the properties to which CMKX has the mineral rights.
Now Casavant Mining can focus on becoming a world diamond power to challenge De Beers at their own level. Urban has achieved his dream and made his loyal investors rich.
All is well. ;-)