Post by suzannefuzzberger on Jan 26, 2006 9:13:35 GMT -5
I listened with considerable interest to an interview with Patrick Byrne at businessjive.com and could not help thinking that there are some easy corporate solutions readily available. It is much along the same lines as current Pixar naked short positions might find themselves.
One train of thought goes thus:
1. For the float of a public company to rise above the level of those shares issued and outstanding by the company itself, there must be naked short sales occurring.
2. Public companies do from time to time issue share exchanges, replacement shares and any number of variety of alternative shares in the normal course of merger and acquisition activity.
3. A small public company finds itself under cross-fire in a "Short Sellers Attack"
4. The said company passes a directors resolution to replace all its issued and outstanding Class A common with a new Class AS (Anti-Short) common shares on a one-for-one basis.
5. All Class A common expire worthless if not exchanged within 60 days. Shareholders have no problem accounting for their shares when dividends are issued, or when M&A is approved. Why would they have any difficulty with a share exchange, provided only that they are genuine shareholders!
The effect, as far as I can tell, would be as follows
1. All shareholders of registrar date receive the new Class AS as transparently as any other normal corporate event.
2. All covered short positions carry on business-as-normal, except for the worry of an ensuing a short squeeze.
3. All naked shorts are out-of-the-money big time, as their positions expire along with the now obsolete Class A common they failed to borrow and they must still cancel to IOU note floating in the system.
4. The company pays a small SEC fee to issue the share exchange, but in return gets the required protection.
5. Naked Short Sellers would ponder very carefully in future before they push the Short Interest of small public companies unreasonably high, knowing the company’s determination to issue a share swap if their genuine shareholders are threatened in this way.
Am I missing something here, because the problem does not seem to me to be that insolvable?
Love to hear your thoughts, Suz
One train of thought goes thus:
1. For the float of a public company to rise above the level of those shares issued and outstanding by the company itself, there must be naked short sales occurring.
2. Public companies do from time to time issue share exchanges, replacement shares and any number of variety of alternative shares in the normal course of merger and acquisition activity.
3. A small public company finds itself under cross-fire in a "Short Sellers Attack"
4. The said company passes a directors resolution to replace all its issued and outstanding Class A common with a new Class AS (Anti-Short) common shares on a one-for-one basis.
5. All Class A common expire worthless if not exchanged within 60 days. Shareholders have no problem accounting for their shares when dividends are issued, or when M&A is approved. Why would they have any difficulty with a share exchange, provided only that they are genuine shareholders!
The effect, as far as I can tell, would be as follows
1. All shareholders of registrar date receive the new Class AS as transparently as any other normal corporate event.
2. All covered short positions carry on business-as-normal, except for the worry of an ensuing a short squeeze.
3. All naked shorts are out-of-the-money big time, as their positions expire along with the now obsolete Class A common they failed to borrow and they must still cancel to IOU note floating in the system.
4. The company pays a small SEC fee to issue the share exchange, but in return gets the required protection.
5. Naked Short Sellers would ponder very carefully in future before they push the Short Interest of small public companies unreasonably high, knowing the company’s determination to issue a share swap if their genuine shareholders are threatened in this way.
Am I missing something here, because the problem does not seem to me to be that insolvable?
Love to hear your thoughts, Suz
