Short Activity in PNV, page-1285

I have now run out of things to sell to buy more of these, so I wonder if I can ask - humbly and honestly, because I am a lawyer not a finance specialist - for someone to explain the theory behind this shorting. Because it just makes no sense to me and I know that the people doing it are very clever. And when clever people do something that makes no sense, that's intriguing and makes me look for answer.

I start by saying that I understand how a short works ordinarily. You borrow, for a fee, a share you think will fall; you sell the share; it falls; you buy it back at a lower price and return it to the person you borrowed it from. In an ideal situation, the company you are shorting goes broke, the shares become worthless and you never have to cover at all. So far, so good.

But obviously there is no way Polynovo is going to cease to exist: it is probably just about cash-flow positive and in any event, as the notes to the annual accounts point out, the company has some discretion in controlling the rate of expenditure, so it could very easily be made cash-flow positive. It has barely any debt, maybe about $7.5m, so it is not going to be wound up by its creditors. Hell, we could probably have a whip round on here to cover that sort of money, if it meant protecting our investment. Now, I did read of a case in the USA where the founder of a company himself bought more shares on the market than his company had ever issued: clearly there was rampant selling going on of shares that did not exist. But I think our market is a bit better regulated than that. So eventually, probably fairly soon at the mooted borrowing fee of 18%, the shorts have got to buy back all those shares.

So my question is: how can they possibly think they can buy back more than 40 million shares without losing everything they have and everything they can ever hope to have in the future? What is the theory of this? What is their end game? The only thing I can think of is that they are hoping to create absolute panic but my God, that sounds like the maddest gamble I can imagine, particularly as it must be conducted in an environment where the more successful they are in depressing the price, the more they risk provoking an out-of-the-blue takeover offer that would create a bidding war that would destroy them.

So can I draw on the wisdom of the group, please? Is there some scenario in which they can pull their fat out of this fire? Or have they joined a push that has become so popular and attracted so many adherents that they have now got themselves into a hopeless position?

A subsidiary question is: Am I right in assuming that if the shorters can't cover, the losers will be those who lent them the shares?