We have talked about this a lot over the years. There's no way to know for sure how much of the short volume is traditional shorting. My guess is that the vast majority of it is related to the historical toxic fundraising. No matter how much NP was told, or by whom, he could not get his head wrapped around how the fundraising was toxic. It was easy for him to raise, but toxic for the company. Here is an example:
Let's say that we have to pay Fife $2M on the loan. I can't remember the exact terms, but he gets a discount to the lowest trading range recently. Say it's a 15% discount (my recollection is that it's 20%). Therefore he is getting shares at $0.30 (or lower) And he gets 6.7 million shares in that transaction that he has to sell short. And his business model is not to hold, it is simply to ensure that he converts and sells within his discount range. In simple terms, his model is to get the shares at a 15% discount and sell well within that 15% spread. Hoping to make 10% on average. In addition to the 10% interest he gets on the loan in the first place.
Now add to that the fact that the Paulson brokers get paid in warrants (I don't remember the exact mix of shares and warrants and retained cash from the raise). So 10% of any raise goes to them. I don't know what the company has raised over the years through Paulson, but let's say it's 200+ million. So let's say there have been 20 million worth of warrants at various strike points. Let's take the latest low, which was $0.09 if only a million of that is being sold, that results in 11 million shares being sold short.
Now, in addition to that, you have all of the warrants that came with the share purchases by the actual shareholders that brought through Paulson. Let's say on average, that it was one warrant per share. And since covid we have roughly gone from 800M shares fully outstanding as converted to at least 1.5 billion. Let's say 1.6 for round numbers. So we have 800 million warrants and shares at various prices just from that time frame. These warrants have to be converted to shares before they can be sold. But if either the converted warrants or the actual shares are sold, they have to be sold short.
Fife sells his shares into positive news, trying to maximize his spread. I would fully expect that the Paulson brokers sell their shares into positive news. And the purchasers through Paulson, some hold their shares, while others de-risk and sell shares and hold warrants. Most of these sell when the share price is above their warrant strike price. All of that creates a large volume of short interest. And a major restriction on the ability for our share price to run. And it never results in the short squeeze because even though the shares are being sold short, the seller actually has the shares. So they don't have to buy to cover.
My best guess is that there is comparatively very low short selling by short sellers sitting at a desk. I'm sure they play around on the margins of our big short interest. But my guess is that they are small bit players in the overall dynamic.
Then, add on top of that, the market makers. They are clearly manipulating the transactions to balance their book of trades on any given day.
And I have no idea if there are people paid to short a stock at the behest of big pharma. I wouldn't be surprised. But it also strikes me as something that should be illegal, easy to leak or get exposed, and a major PR disaster if exposed. Add to that, that our short problem is self-inflicted. And at no cost to Big pharma. So my hunch is that if there is nefarious short volume from big pharma, it is relatively small because it's not needed.
I can't wait until we burn through the toxic financing anchor and ultimately uplist to a real exchange.
And, since we have had real CFO expertise, we have not been doing toxic financing. Hopefully those days are behind us.
Those who have known me on the board for a long time know that I have never been an NP fan. And his lack of understanding of financing was always one of the major issues I had with him.
Let's say that we have to pay Fife $2M on the loan. I can't remember the exact terms, but he gets a discount to the lowest trading range recently. Say it's a 15% discount (my recollection is that it's 20%). Therefore he is getting shares at $0.30 (or lower) And he gets 6.7 million shares in that transaction that he has to sell short. And his business model is not to hold, it is simply to ensure that he converts and sells within his discount range. In simple terms, his model is to get the shares at a 15% discount and sell well within that 15% spread. Hoping to make 10% on average. In addition to the 10% interest he gets on the loan in the first place.
Now add to that the fact that the Paulson brokers get paid in warrants (I don't remember the exact mix of shares and warrants and retained cash from the raise). So 10% of any raise goes to them. I don't know what the company has raised over the years through Paulson, but let's say it's 200+ million. So let's say there have been 20 million worth of warrants at various strike points. Let's take the latest low, which was $0.09 if only a million of that is being sold, that results in 11 million shares being sold short.
Now, in addition to that, you have all of the warrants that came with the share purchases by the actual shareholders that brought through Paulson. Let's say on average, that it was one warrant per share. And since covid we have roughly gone from 800M shares fully outstanding as converted to at least 1.5 billion. Let's say 1.6 for round numbers. So we have 800 million warrants and shares at various prices just from that time frame. These warrants have to be converted to shares before they can be sold. But if either the converted warrants or the actual shares are sold, they have to be sold short.
Fife sells his shares into positive news, trying to maximize his spread. I would fully expect that the Paulson brokers sell their shares into positive news. And the purchasers through Paulson, some hold their shares, while others de-risk and sell shares and hold warrants. Most of these sell when the share price is above their warrant strike price. All of that creates a large volume of short interest. And a major restriction on the ability for our share price to run. And it never results in the short squeeze because even though the shares are being sold short, the seller actually has the shares. So they don't have to buy to cover.
My best guess is that there is comparatively very low short selling by short sellers sitting at a desk. I'm sure they play around on the margins of our big short interest. But my guess is that they are small bit players in the overall dynamic.
Then, add on top of that, the market makers. They are clearly manipulating the transactions to balance their book of trades on any given day.
And I have no idea if there are people paid to short a stock at the behest of big pharma. I wouldn't be surprised. But it also strikes me as something that should be illegal, easy to leak or get exposed, and a major PR disaster if exposed. Add to that, that our short problem is self-inflicted. And at no cost to Big pharma. So my hunch is that if there is nefarious short volume from big pharma, it is relatively small because it's not needed.
I can't wait until we burn through the toxic financing anchor and ultimately uplist to a real exchange.
And, since we have had real CFO expertise, we have not been doing toxic financing. Hopefully those days are behind us.
Those who have known me on the board for a long time know that I have never been an NP fan. And his lack of understanding of financing was always one of the major issues I had with him.
33
