I found this article that talks about dividends an
Post# of 39368
Posted On: 09/05/2014 12:10:18 PM
I found this article that talks about dividends and nss:
"It is widely known in the stock market that shorting and illegal naked shorting are often used to manipulate stocks and cause unjust enrichment of ruthless speculators. I advise management of all small cap companies that are subject to attacks from naked short sellers to uncover such illegal activities and protect their shareholders by issuing stock dividends on a quarterly, or even monthly, basis. This practice results in an automatic audit of issued and outstanding shares and help to keep away naked short sellers."
How exactly does this work? Here's how... When a company issues a stock dividend there must be an audit of all issued and outstanding shares to determine who to issue the stock dividend to and how much stock to issue to them. A legal short seller borrows shares and sells those shares onto the open market and until they buy them back (cover) and return them to the lender they are responsible for interest, margin requirements and any dividend payments (be it monetary or shares of stock) owed to the lender. Naked short selling is short selling a stock without first arranging a borrow. If the stock is in short supply, finding shares to borrow can be difficult.
If a company declares a stock dividend both the naked short seller and the short seller are on the hook to deliver those shares to the lender. This forces the short seller to "buy to cover" so they can return the shares to the lender. Couple this with the typical price appreciation of a dividend announcement and the fact that short sellers can get caught in a stampede that is self perpetuating because all of the short sellers try to "buy and cover" or exit at once. This phenomena is known as a "short squeeze" and drives the share price higher as shorts rush to the exits to close out part or all of their positions or at least whatever is required to satisfy the stock dividend requirement. Stocks with a high percentage of the float sold short are particularly susceptible to this phenomena.
Naked shorting can also effectively be accomplished via an illegal option strategy abusing the market maker exemption for short sales called a "reverse conversion". The SEC has caught onto this scheme and recently put out a "Risk Alert" detailing how to identify this activity but few think this "risk alert" will amount to any additional enforcement. The net result of illegal reverse conversions is a flood of fake shares that the short seller pours onto the open market in an attempt to quash rallies or stifle the stock price. These option pirates would be affected, just like a naked short seller, by a company issuing a stock dividend.
http://seekingalpha.com/article/1645772-biola...eet-cheers
"It is widely known in the stock market that shorting and illegal naked shorting are often used to manipulate stocks and cause unjust enrichment of ruthless speculators. I advise management of all small cap companies that are subject to attacks from naked short sellers to uncover such illegal activities and protect their shareholders by issuing stock dividends on a quarterly, or even monthly, basis. This practice results in an automatic audit of issued and outstanding shares and help to keep away naked short sellers."
How exactly does this work? Here's how... When a company issues a stock dividend there must be an audit of all issued and outstanding shares to determine who to issue the stock dividend to and how much stock to issue to them. A legal short seller borrows shares and sells those shares onto the open market and until they buy them back (cover) and return them to the lender they are responsible for interest, margin requirements and any dividend payments (be it monetary or shares of stock) owed to the lender. Naked short selling is short selling a stock without first arranging a borrow. If the stock is in short supply, finding shares to borrow can be difficult.
If a company declares a stock dividend both the naked short seller and the short seller are on the hook to deliver those shares to the lender. This forces the short seller to "buy to cover" so they can return the shares to the lender. Couple this with the typical price appreciation of a dividend announcement and the fact that short sellers can get caught in a stampede that is self perpetuating because all of the short sellers try to "buy and cover" or exit at once. This phenomena is known as a "short squeeze" and drives the share price higher as shorts rush to the exits to close out part or all of their positions or at least whatever is required to satisfy the stock dividend requirement. Stocks with a high percentage of the float sold short are particularly susceptible to this phenomena.
Naked shorting can also effectively be accomplished via an illegal option strategy abusing the market maker exemption for short sales called a "reverse conversion". The SEC has caught onto this scheme and recently put out a "Risk Alert" detailing how to identify this activity but few think this "risk alert" will amount to any additional enforcement. The net result of illegal reverse conversions is a flood of fake shares that the short seller pours onto the open market in an attempt to quash rallies or stifle the stock price. These option pirates would be affected, just like a naked short seller, by a company issuing a stock dividend.
http://seekingalpha.com/article/1645772-biola...eet-cheers
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