Brainchip Short Discussion, page-102

Ok I think I am beginning to understand the shorting process.

Shorters borrowed shares from brokers for a fee. I understand the fee is around 18%pa. The shorters then sell the shares on market. At this stage both the original owner, who may be unaware of the transaction, and the shorter have a beneficial interest in the shares

In April 2022 the RBAstarted increasing interest rates.

Using BRN as anexample.

Lots of people, cashed up because of COVID and sick of 0% interest looked around and decided the share market was a good place to invest. Some where careful and decided to invest in index funds, others were more adventurous and followed momentum investing.

BRN was going up so it looked like a good bet. BRN greatlyincreased in price as a result of some good stories.

In January 2020BRN (Shorts 0.02%) was $0.05. In January 2021 BRN (Shorts 0.07%) was$0.50 as a result of some significant technical achievements. InJanuary 2022 BRN (Shorts 2.50%) spiked to $2.00 as a result ofglowing reports by Mercedes engineers.

In April 2022 the RBAstarted increasing interest rates.

Profit taking saw BRN (Shorts2.63%) fall to $1.00.

In 20 June 2022 BRN(Shorts 4.44%) was added to the S&P ASX 200 index. Index fundbuying push the price to $1.10 as the funds bought 100,000,000* BRNshares. (*guess anyone know the true figure).

Shorters engaged intactical selling that lowered BRN’s price. Many BRN holders whereaffected by the increase in interest rate and seeing a falling pricesold out. Investors interested in buying BRN decided not to catch afalling knife.

The tactical selling in effect was in shorters takingnew position selling to other shorters getting cover. The fall in BRNshare price neatly matching the increase in percentage shorted.

InAugust 2023 BRN (Shorts 8.20%) price fell to $0.27. The total numberof shorted shares was about 130,000,000.

20 Sept 2023 BRN(Shorts 7.3%) $0.30 was removed from the S&P ASC 200 index . Theindex funds needed to rebalance .

This is where themagic happens. I don’t understand. The index funds sell the shares,the shorters buy the shares to return to the lender. This cross trade happens off market. (Can someone explain how this works?)

The result being theindex funds have lost about $70,000,000 and the Shorters made$70,000,000 less costs.

The index fund managers don’t have to worryabout the loss because they are just following the index. Theinvestors in the index fund are none the wiser.

The whole processhas benefited me because I managed to top up @$0.28 and will hold andenjoy BRN’s progress.