Nebett, Not sure why we are talking about any significant shorting here?
For a share to be shorted, an institution has to lend out the shares to Shorters for a fee plus interest. Not just anyone can lend shares out. That share is then sold by the Shorter (when they don’t even own it) only for the Shorter to have to buy it back at some point in the future so that it can be returned to the lending institution. The Shorter only makes a return when the value of the share drops over that time period - so that, when they do buy it back (cover), it is at a lower price than when they received and sold it. The institution gains the lending fee and the interest charged. The institution itself doesn’t suffer any loss in the shorting campaign - even if they get the share returned at a significantly lower value…..it is the unfortunate fund members that actually wear the loss! The institution gets away with it scott free as they are mandated to reflect the index - and, if the index goes down, it has no impact on them.
It is illegal to “short and distort” in Australia and many other countries. The “distort” part of this is where a Shorter attempts to influence a share price downwards by misleading and deceptive conduct - such as spreading untruths and unsubstantiated information (on social media and/or forums such as HC) with the intent to encourage selling in the marketplace. A real low, scum of the earth thing to do as far as I’m concerned - particularly to retail investors that may not have done their homework. I personally see it as predatory against weaker holders.
Typically, a share is likely to be shorted when it is considered to be overvalued and there is no positive news expected for an extended period of time. The depth of the shorting depends on how many shares are held by institutions that are happy to lend out shares that don’t belong to them. When a share register is mostly made up of retail investors, there is a much lower likelihood of high numbers of shares being shorted. When a Company makes it into an index (like the ASX200 for example), this forces institutions to purchase shares in that Company as they are mandated to reflect the index. The inclusion of a share in the index with the share being seen as overvalued increases the likelihood of that share being shorted. Otherwise, the percentage of shares able to be shorted are typically very low and the impact on the share price from any shorting is minimal at best.
So, as far as LKE is concerned, we are not in an index at this point, our share register is to a large degree “retail”, the share itself is not generally seen as overvalued considering the macro scenario (unless you ask our usual downramping suspects on these threads) and we have plenty of good news flow coming through in the next 3/6/9/12 months to keep the share price moving in an upwards direction. IMO, under the current circumstances for LKE, we are unlikely to be shorted to any meaningful degree……so why even bring it up!
DYOR
LKE Price at posting:
54.5¢ Sentiment: Hold Disclosure: Held
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