Why do you put on shorts? The proper reason to sell short is...

Why do you put on shorts? The proper reason to sell short is because you expect a market correction several orders of magnitude greater than the price you have sold at. It is a gamble, of course because getting your timing wrong in this game is as bad as being wrong - either way you lose money. But if you get the timing right you are going to be the guy (or gal) who puts in the bottom when you close out those shorts. If shorts didn't exist then markets would fall much more in a crash than they do.

However, some times shorts can be misused when attempting a hostile takeover of a company. In this scenario the shareholders must lose confidence in the board and in the direction of the company and want out in a falling market. Naturally they sell to the party selling the shorts. When the predator has the majority of the shares they stop the short selling and mop up the final shares.

At the moment i do not see the second scenario in play. What I see is a lot of paper shuffling as we progress along the Lassonde curve and some speculative bets on market crashes. The major shareholders are not going to be selling for less than they have acquired their shares and many will not sell until they have tripled their money (at least) and those guys bought in for no less than 90 cents (plus some adjustment for currency moves over time) or up to $1.25 a share in more recent capital raisings. Under Australian corporate law all shareholders have to get the same price in a takeover so there will be no sweetheart deals for the major shareholders. In a hostile takeover there will probably be more than one bidder for DEG and it will depend upon who wants it most as to how high the price goes. But while we are looking at predators, the predators are eyeing off each other because they are all vulnerable to a takeover themselves, some are much more vulnerable than DEG. They are culling the jungle which will leave only the hungriest and the fittest left to bid for DEG and that may ensure the best price possible if there are two or three motivated bidders with deep pockets. Time will tell.

If you want to limit short selling switch your holding from CHESS to Issuer Sponsored because while your shares are in CHESS your broker can lend them out.