Here's why people on other boards are screaming fo
Post# of 72440
Posted On: 06/18/2016 10:08:23 AM
Here's why people on other boards are screaming for a reverse split and uplisting. A reverse split is NOT good for shareholders in the long run, and here's why:
It is advantageous to shorts and traders for a stock to be listed on an exchange that has options. This way they can short a stock, and buy inexpensive protective options to buy (calls) on the stock -- so that if they are short the stock and it announces great news, the call options limit their loss. Here's a hypothetical:
Stock trades at 10 after its reverse split. A gang of shorts attacks it, preferably (from their standpoint) at a time when no news is expected or particularly if there is some excuse they can use like an SA hit piece, or just an article saying that there will have to be significant share sales by the company to fund clinical trials, thus leading to dilution. (NOTE: This doesn't have to be TRUE, just something that they say. For instance, if a company has a deal with Aspire, pretend that the company is desperate and will have to sell shares below market value). Then, the gang shorts the stock like crazy and drives the share price down, say 20% or more, to 8. As the stock goes down, the value of an option to buy the stock at 10 (which is significantly above the current share price) becomes very inexpensive.
The shorts then edge into those calls, just in case the company announces news like a partnership, a cure for cancer, a new antibiotic, a treatment for psoriasis, or a treatment for oral mucositis. Just as an example.
So lets say the stock is trading at 8, and the shorts are now a buck or two to the good. They paid maybe 50 cents for the "insurance" calls. Now news is announced, it's great -- so they quickly cover their shorts for more profit than the 50 cents that the call option cost them, even if the stock has quickly moved up to 9. (Remember they're monitoring it closely, or have a trailing stop order in to buy.) So, they've profited from the short, and now they will profit from the calls.
They were able to short the stock with insurance in the form of options to buy the stock, just in case they can't cover their short in time.
On the flip side, they can buy puts (options to sell the stock) at say 7.50, for pennies, when the stock is trading at 10. THEN they short it, and the value of the puts goes up too. They sell the puts for a nice profit, plow those profits back into the options to buy at 10, and now they have made money on the short and the puts, and can put those profits from the puts into protection in the form of calls.
THIS is why the shorts are so anxious for a reverse split and uplisting, and keep calling for it even though Leo has repeatedly said he will not do a R/S.
If you want an example of why traders want this, and what they did, you need look no further than AVXL. They were very long AVXL when it said it would do a reverse split. The poster "etradeedge" was pumping the stock like crazy. It ran up big, uplisted and then -- whammo. Back down to near where it was pre-split (adjusting for the split ratio). They made lots of money pumping it to the innocent who believed what they read at lieHUB. (The first move up on the left side of the chart was on news that they got a grant from the Michael J. Fox Foundation and that they were going to test the drug for epilepsy since it had a good effect in animal tests. Then, the R/S stuff -- so that's why I say that the price is back down to where it was before the R/S news, but after the run-up on scientific news.)
Is this really what anyone wants for CTIX? Another opportunity for criminals to profit from pumping and dumping?
http://bigcharts.marketwatch.com/advchart/fra...p;state=11
It is advantageous to shorts and traders for a stock to be listed on an exchange that has options. This way they can short a stock, and buy inexpensive protective options to buy (calls) on the stock -- so that if they are short the stock and it announces great news, the call options limit their loss. Here's a hypothetical:
Stock trades at 10 after its reverse split. A gang of shorts attacks it, preferably (from their standpoint) at a time when no news is expected or particularly if there is some excuse they can use like an SA hit piece, or just an article saying that there will have to be significant share sales by the company to fund clinical trials, thus leading to dilution. (NOTE: This doesn't have to be TRUE, just something that they say. For instance, if a company has a deal with Aspire, pretend that the company is desperate and will have to sell shares below market value). Then, the gang shorts the stock like crazy and drives the share price down, say 20% or more, to 8. As the stock goes down, the value of an option to buy the stock at 10 (which is significantly above the current share price) becomes very inexpensive.
The shorts then edge into those calls, just in case the company announces news like a partnership, a cure for cancer, a new antibiotic, a treatment for psoriasis, or a treatment for oral mucositis. Just as an example.
So lets say the stock is trading at 8, and the shorts are now a buck or two to the good. They paid maybe 50 cents for the "insurance" calls. Now news is announced, it's great -- so they quickly cover their shorts for more profit than the 50 cents that the call option cost them, even if the stock has quickly moved up to 9. (Remember they're monitoring it closely, or have a trailing stop order in to buy.) So, they've profited from the short, and now they will profit from the calls.
They were able to short the stock with insurance in the form of options to buy the stock, just in case they can't cover their short in time.
On the flip side, they can buy puts (options to sell the stock) at say 7.50, for pennies, when the stock is trading at 10. THEN they short it, and the value of the puts goes up too. They sell the puts for a nice profit, plow those profits back into the options to buy at 10, and now they have made money on the short and the puts, and can put those profits from the puts into protection in the form of calls.
THIS is why the shorts are so anxious for a reverse split and uplisting, and keep calling for it even though Leo has repeatedly said he will not do a R/S.
If you want an example of why traders want this, and what they did, you need look no further than AVXL. They were very long AVXL when it said it would do a reverse split. The poster "etradeedge" was pumping the stock like crazy. It ran up big, uplisted and then -- whammo. Back down to near where it was pre-split (adjusting for the split ratio). They made lots of money pumping it to the innocent who believed what they read at lieHUB. (The first move up on the left side of the chart was on news that they got a grant from the Michael J. Fox Foundation and that they were going to test the drug for epilepsy since it had a good effect in animal tests. Then, the R/S stuff -- so that's why I say that the price is back down to where it was before the R/S news, but after the run-up on scientific news.)
Is this really what anyone wants for CTIX? Another opportunity for criminals to profit from pumping and dumping?
http://bigcharts.marketwatch.com/advchart/fra...p;state=11
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