shorting and short attacks to explain price decreases has long been an argument by the retail market. Without experience in shorting or how the process works it is also one generally misunderstood. People look at the decrease from 40c around 22nd March to present day being a short attack. But from 22nd march about 30M of shares have been opened short. This is against a total volume traded of ~300M . This is 10% of the total shares sold, i think you may want to consider what is the other 90% representing, well that is existing holders selling out of their position.
Before you say it no i dont believe 10% of the traded volume is going to influence 90%. But you are entitled to your opinion but neither opinion should be stated as a basis of fact.
More likely 90% of existing holders for various reasons none of us can really know decided to sell. cash out buy something. free carry a position lock in profits based on their view of the price action i.e. they think it will go down in price from their sell point. etc etc
The 10% of shorters joined this selling based on their own perception. price action is too high so again believe price will fall (this is exactly the same view that the existing holder has taken in selling above last point)
Now of course within this people are only now talking about shorting and to be frank are portraying themselves as overnight experts on the subject.
it is not co-incidence the company entered the All Ords index at end of March-21 and the short float started to increase. When you understand the mechanism of index funds participation upon stock inclusion, the drivers that prime broking houses and index funds have you will better understand this relationship.
One last thing yes i do short stocks with access to a Prime Broker that allows you to. (it is no different to deriving profit from a long position based on the same principles of price action and valuation, or the old adage view of something being cheap (buy) or expensive (Sell) ,
However when people say it should be illegal and banned or you shouldn't sell something that you don't own because someone else owns it. Remember this, Banks do it all the time with your money. Unless you think the savings deposit of money you have at the bank sits in a vault on a shelf with your name on it? This money you have is lent out at a percentage (which you dont receive) by the bank to lenders. The majority of readers on this forum with mortgages are lenders some owing more money than they possess in cash savings. The lender then repays the money (buys the stock) back to the bank. Substitute "Bank" for "Prime Brokers" and money for script you have short selling.
Unless you are your own bank with money on the shelf (wont be doing much earning though), if you trade shares at a prime broker "Bank" then they will potentially borrow out a portion of the script they have on books.
Some places like commsec and generally your net brokers will not, but this is better understood when you understand the difference between a Broker and a Prime Broker and the clients they serve.
ADN Price at posting:
19.5¢ Sentiment: None Disclosure: Not Held
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