IPIX readers, naked shorting is almost nonexistent in this stock 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 two-day settlement period. 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 1597 shares (0.001% of the OS) were failure-to-deliver as of June 11.
20180611|45782D100|IPIX|1597|INNOVATION PHARMACEU|0.47
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 All issued and outstanding certificates from old shares will no longer represent an interest in the company until exchanged.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. For example,
Amarantus - massive covering by naked shorts after name/CUSIP # change.
https://investorshangout.com/post/view?id=4897607
Leo’s legal advisor includes Michael Sullivan, a former US Attorney for MA with connections to the SEC , so his method to expose naked shorting must have some merits. Money for lawyer fees and website redesign were required at a critical time when the SP was low and dilutions were high. I highly doubt Leo disliked the name CTIX all the sudden and went through all the troubles just to change it to IPIX at shareholders’ expense.
Reason #3 - No Actual Evidence
By actual evidence I mean official SEC data or something that can be used in court. Proponents will claim IPIX is under attack by sharing naked shorting articles, videos and court cases. Here’s an analogy - just because there’re thieves (naked shorts) in my neighborhood (other companies) doesn’t mean there’re thieves in my house (IPIX). If Leo is suing naked shorts, he’s going to need actual evidences. He can’t just say his company is under attack because other companies are under attack or naked shorting exists in general in court.
Investors should know where the constant selling pressure is coming from.
https://investorshangout.com/post/view?id=5115382
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
Action by SEC
2018 - SEC makes rule on 'naked' short-selling permanent
https://abcnews.go.com/Business/story?id=8186474&page=1
2017 - Millennium Settles Charges of Illegal Short Selling in Advance of Stock Offerings
https://www.sec.gov/news/press-release/2017-203
2016 - Case Sheds Light on Goldman’s Role as Lender in Short Sales
https://www.nytimes.com/2016/01/31/business/c...sales.html
2015 - SEC Charges Six Firms for Short Selling Violations in Advance of Stock Offerings
https://www.sec.gov/news/pressrelease/2015-239.html
2014 - SEC Charges Two College Professors in Naked Short Selling Scheme
https://www.sec.gov/news/press-release/2014-20
2013 - SEC Charges 23 Firms With Short Selling Violations in Crackdown on Potential Manipulation in Advance of Stock Offerings
https://www.sec.gov/news/press-release/2013-182
2012 - SEC Charges Brothers With Short Selling Violations
https://www.sec.gov/news/press-release/2012-2012-22htm
Action by FINRA
"In 2017, through our aggressive vigilance, we brought 1,369 disciplinary actions against registered brokers and firms. We levied $66.8 million in fines. And we ordered $66.8 million in restitution to harmed investors. We also referred more than 850 fraud and insider trading cases to the SEC and other agencies for litigation and/or prosecution."
Disciplinary actions - https://www.finra.org/industry/decisions
Fraud and insider trading cases - https://www.finra.org/newsroom/actions-result...uthorities
https://www.finra.org/about
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 two-day settlement period. 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 1597 shares (0.001% of the OS) were failure-to-deliver as of June 11.
20180611|45782D100|IPIX|1597|INNOVATION PHARMACEU|0.47
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. For example,
Amarantus - massive covering by naked shorts after name/CUSIP # change.
https://investorshangout.com/post/view?id=4897607
Leo’s legal advisor includes Michael Sullivan, a former US Attorney for MA with connections to the SEC , so his method to expose naked shorting must have some merits. Money for lawyer fees and website redesign were required at a critical time when the SP was low and dilutions were high. I highly doubt Leo disliked the name CTIX all the sudden and went through all the troubles just to change it to IPIX at shareholders’ expense.
Reason #3 - No Actual Evidence
By actual evidence I mean official SEC data or something that can be used in court. Proponents will claim IPIX is under attack by sharing naked shorting articles, videos and court cases. Here’s an analogy - just because there’re thieves (naked shorts) in my neighborhood (other companies) doesn’t mean there’re thieves in my house (IPIX). If Leo is suing naked shorts, he’s going to need actual evidences. He can’t just say his company is under attack because other companies are under attack or naked shorting exists in general in court.
Investors should know where the constant selling pressure is coming from.
https://investorshangout.com/post/view?id=5115382
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
Action by SEC
2018 - SEC makes rule on 'naked' short-selling permanent
https://abcnews.go.com/Business/story?id=8186474&page=1
2017 - Millennium Settles Charges of Illegal Short Selling in Advance of Stock Offerings
https://www.sec.gov/news/press-release/2017-203
2016 - Case Sheds Light on Goldman’s Role as Lender in Short Sales
https://www.nytimes.com/2016/01/31/business/c...sales.html
2015 - SEC Charges Six Firms for Short Selling Violations in Advance of Stock Offerings
https://www.sec.gov/news/pressrelease/2015-239.html
2014 - SEC Charges Two College Professors in Naked Short Selling Scheme
https://www.sec.gov/news/press-release/2014-20
2013 - SEC Charges 23 Firms With Short Selling Violations in Crackdown on Potential Manipulation in Advance of Stock Offerings
https://www.sec.gov/news/press-release/2013-182
2012 - SEC Charges Brothers With Short Selling Violations
https://www.sec.gov/news/press-release/2012-2012-22htm
Action by FINRA
"In 2017, through our aggressive vigilance, we brought 1,369 disciplinary actions against registered brokers and firms. We levied $66.8 million in fines. And we ordered $66.8 million in restitution to harmed investors. We also referred more than 850 fraud and insider trading cases to the SEC and other agencies for litigation and/or prosecution."
Disciplinary actions - https://www.finra.org/industry/decisions
Fraud and insider trading cases - https://www.finra.org/newsroom/actions-result...uthorities
https://www.finra.org/about
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