New investors, naked shorting is almost nonexistent in IPIX and here’s why.
Reason #1 - SEC Failure-to-deliver Data
“In a “naked” short sale, the seller does not borrow or arrange to borrow the securities in time to make delivery to the buyer within the standard three-day settlement period.[3] As a result, the seller fails to deliver securities to the buyer when delivery is due ( known as a “failure to deliver” or “fail” ).”
https://www.sec.gov/investor/pubs/regsho.htm
According to the SEC, only 25,662 shares were failure-to-deliver as of October 31. That's a measly 0.018% of the outstanding shares.
20171031|45782D100|IPIX|25662|INNOVATION PHARMACEU|0.79
https://www.sec.gov/data/foiadocsfailsdatahtm
Reason #2 - Name/CUSIP # Change
"Changing the stock cusip number results in each share with the old cusip number having to be exchanged for a share with the new cusip number, which causes each short position to have to prove the borrow. Naked short positions would be unable to comply and those positions could have to be covered by purchasing shares with the new cusip on the open market. "
https://groovevc.wordpress.com/2017/04/12/is-...t-squeeze/
"Both your transfer agent and IR firm should be able to advise you on the effectiveness of combating naked shorts by changing CUSIP numbers, reverse mergers, and/or reverse splits. Although the long-term effectiveness of these strategies is questionable, it may be useful as part of a larger strategy to deter naked shorting. After changing your company's CUSIP number, for instance, all existing stock certificates must be exchanged for new ones. All issued and outstanding certificates from old shares will no longer represent an interest in the company until exchanged. "
http://www.hawkassociates.com/ir/white/shorts.cfm
Leo decided to change the company name and CUSIP # to expose naked shorting on June 9, 2017. The total volume after the name/CUSIP # change (+3 days) was ~1.625M shares, which indicated the covering was by legal shorts because legal short interest was ~1.2M shares at that time. If naked positions were 10M shares (hypothetical), the total volume would be more than that because naked shorts must cover.
Caution by SEC
11. I read on an internet chat room or website that a specific security has a large number of fails; are these sources reliable?
" Investors can and should verify the number of failures to deliver in a specific security by checking publicly available data on failures to deliver. The Commission publishes on its website failures to deliver data for all equity securities, regardless of the fails level, twice per month. For current failures to deliver information, see http://www.sec.gov/foia/docs/failsdata.htm.
Investors should always be cautious that issuers, promoters, or shareholders may be seeking to stimulate buying interest by making false, misleading or unfounded statements in internet chat rooms or other such forums about alleged large “naked” short positions in some smaller issuers. Some individuals may encourage other investors to buy these issuers’ securities by claiming that there will be an imminent short squeeze, in which the alleged “naked” short sellers will be forced to cover open short positions at increasing prices. These claims in fact may be false.
https://www.sec.gov/investor/pubs/regsho.htm
Reason #1 - SEC Failure-to-deliver Data
“In a “naked” short sale, the seller does not borrow or arrange to borrow the securities in time to make delivery to the buyer within the standard three-day settlement period.[3] As a result, the seller fails to deliver securities to the buyer when delivery is due ( known as a “failure to deliver” or “fail” ).”
https://www.sec.gov/investor/pubs/regsho.htm
According to the SEC, only 25,662 shares were failure-to-deliver as of October 31. That's a measly 0.018% of the outstanding shares.
20171031|45782D100|IPIX|25662|INNOVATION PHARMACEU|0.79
https://www.sec.gov/data/foiadocsfailsdatahtm
Reason #2 - Name/CUSIP # Change
"Changing the stock cusip number results in each share with the old cusip number having to be exchanged for a share with the new cusip number, which causes each short position to have to prove the borrow. Naked short positions would be unable to comply and those positions could have to be covered by purchasing shares with the new cusip on the open market. "
https://groovevc.wordpress.com/2017/04/12/is-...t-squeeze/
"Both your transfer agent and IR firm should be able to advise you on the effectiveness of combating naked shorts by changing CUSIP numbers, reverse mergers, and/or reverse splits. Although the long-term effectiveness of these strategies is questionable, it may be useful as part of a larger strategy to deter naked shorting. After changing your company's CUSIP number, for instance, all existing stock certificates must be exchanged for new ones. All issued and outstanding certificates from old shares will no longer represent an interest in the company until exchanged. "
http://www.hawkassociates.com/ir/white/shorts.cfm
Leo decided to change the company name and CUSIP # to expose naked shorting on June 9, 2017. The total volume after the name/CUSIP # change (+3 days) was ~1.625M shares, which indicated the covering was by legal shorts because legal short interest was ~1.2M shares at that time. If naked positions were 10M shares (hypothetical), the total volume would be more than that because naked shorts must cover.
Caution by SEC
11. I read on an internet chat room or website that a specific security has a large number of fails; are these sources reliable?
" Investors can and should verify the number of failures to deliver in a specific security by checking publicly available data on failures to deliver. The Commission publishes on its website failures to deliver data for all equity securities, regardless of the fails level, twice per month. For current failures to deliver information, see http://www.sec.gov/foia/docs/failsdata.htm.
Investors should always be cautious that issuers, promoters, or shareholders may be seeking to stimulate buying interest by making false, misleading or unfounded statements in internet chat rooms or other such forums about alleged large “naked” short positions in some smaller issuers. Some individuals may encourage other investors to buy these issuers’ securities by claiming that there will be an imminent short squeeze, in which the alleged “naked” short sellers will be forced to cover open short positions at increasing prices. These claims in fact may be false.
https://www.sec.gov/investor/pubs/regsho.htm
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