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Posted On: 06/11/2025 3:41:44 PM
Post# of 154599
Nice reply, thanks. I agree generally, though I don't think the warrant sales are recorded as short unless they sell before receiving the shares, as that AI analysis noted.
I would add another category that I've learned about in my AI travels...Warrant holders have another option: They can sell short and thus lock in a sale price, then exercise and effectively cover their short by buying the requisite number of shares which they now legally own. They don't have to borrow the shares to sell at the beginning of this process, since the broker knows they have the warrants to back the transaction. It's called "shorting against the warrant" and insulates the seller from any downward price movement associated with the sale since they've locked in their sale price.
They then can exercise their warrants and deliver the shares to the broker without buying them on the open market, thus there's no upward pressure on the stock price since they're covering from non-market sources (newly issued shares) and so the stock price can continue down. It's called the "warrant shorting ratchet", and is completely legal. In the worst case for longs like us, they can keep repeating this, creating constant sell-side pressure without corresponding buy-side demand. Understand I'm not saying that's happening here, just describing the strategy. And to top it off, these shorted shares don't show up in the short interest data, since they're quickly covered by the warrants. The warrant exercises do end up in the float, however, and thus contribute to dilution.
Sorry, I feel like this is a lot to absorb, at least it was for me, but we have to know what we're up against, and many of these Paulson group warrant holders are savvy people with advisors who would know about this strategy and must be part of the shorting activity we're seeing.
So there you have it, Ramjet. Category 6?
I would add another category that I've learned about in my AI travels...Warrant holders have another option: They can sell short and thus lock in a sale price, then exercise and effectively cover their short by buying the requisite number of shares which they now legally own. They don't have to borrow the shares to sell at the beginning of this process, since the broker knows they have the warrants to back the transaction. It's called "shorting against the warrant" and insulates the seller from any downward price movement associated with the sale since they've locked in their sale price.
They then can exercise their warrants and deliver the shares to the broker without buying them on the open market, thus there's no upward pressure on the stock price since they're covering from non-market sources (newly issued shares) and so the stock price can continue down. It's called the "warrant shorting ratchet", and is completely legal. In the worst case for longs like us, they can keep repeating this, creating constant sell-side pressure without corresponding buy-side demand. Understand I'm not saying that's happening here, just describing the strategy. And to top it off, these shorted shares don't show up in the short interest data, since they're quickly covered by the warrants. The warrant exercises do end up in the float, however, and thus contribute to dilution.
Sorry, I feel like this is a lot to absorb, at least it was for me, but we have to know what we're up against, and many of these Paulson group warrant holders are savvy people with advisors who would know about this strategy and must be part of the shorting activity we're seeing.
So there you have it, Ramjet. Category 6?
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