crossed sale , page-13

MarkieMills...

"I think the market has over-reacted. UBS - 24m to buy back to close their short??? Haven't investigated that."

This is what the ASX likes to tell everyone, because it sounds all warm and fuzzy...and fair...that the stock will be "bought back"...

Unfortunately, this rarely happens in a world where stock prices can be driven in any direction by trading algorithms, sanctioned no less by the ASX...and groups can move stock around without any real monitoring by the authorities.

It looks like a rort...it smells like a rort...it even sounds like a rort...lol, we all know it is a rort...but for some reason the regulators are blind to it and the damage it is doing to Australian Companies en-masse.

One of the most insidious aspects of a market well and truly controlled by "short selling induced market makers" is that more often than not the short-sold shares are never in fact bought back on-market (ie. re-balancing the damage caused by the initial selling)...and instead, are more often than not replaced off-market via a CR, or by using any number of similar off-market based stock buying strategies.

These can take many forms...

For some companies it might be a large convertible note sitting on the register that literally "explodes" into 100's of millions of new shares once certain prices are breached (nearly always relatively low prices); or it might be a margin point for some hapless larger holders (or management); price triggered lone covenants; options conversion levels, or; it can even involve a strategy surrounding a take-over or similar corporate activity (the ultimate way to cover short-sold shares).

Point being...the damage short-sold shares can do to a stock, especially with the help of auto-bot based price "management" shenanigans, does not necessarily EVER get re-balanced by a similar degree of buying pressure as the stock is replaced on-market!

These sorts of activites can be very damaging for some Companies...even terminal...and I have to say appears to be a very smelly scenario here for SRQ. I would like to wager these short-sold shares will never be replaced on market...instead, they will be replaced via a heavily discounted placement sometime in the near future.

Meanwhile, the buyer of the shorted shares (other peoples money = fall-guy fund) wears the loss, but also takes up a large portion of the placement at the new low prices (along with the original shorter who replaces all shorted stock off-market and picks up additional stock)...and then, when all is locked away, they use the same auto-bot price driving algorithms to collectively push the stock back up into a range somewhere above a net profit line for themsleves, but typically much lower than where this all started from, meaning shareholders get collectively shafted.

The maths works out for the players...typically in the form of major profits for those who instigated the short, and modest profits for the "other peoples money = fall guy fund".

Sadly, the share price rarely if ever recovers for any period...and due to significant dilution and a massively expanded free-float that is often associated with such stings, the shares are often destined for penny-dreadful oblivion.

If you think this is just the bane of the micro-cap end...we need look no further than the recent GFC, when many of the ASX top 50 were falling over themselves to issue stock more or less at the bottom of the fall.

This was perhaps one of the better examples of how the mute argument for the negative impact of shorted stock "balancing out" when they are bought back, is at best naive...and at worst, nothing more than a complicit re-direction.

Let me remind everyone, in spite of the above, apparently the ASX see no problem with auto-bot trading, nor indeed the practice of shorting stock without any real regulation beyond window-dressing or guarantees of buying it all back on the same platform it was originally sold...or for that matter, even keeping decent records of such transactions?

So...can someone please remind me again, the benefits of a system apparently set-up to prey upon and if not send to the wall, then severely inhibit the capacity of many Australian Company's to expand and/or develop and create jobs...and by extension, destroy the collective value of Australian shareholdings...most of which are nested away in the country's superannuation net-eggs and being relied on to fund the vast majority of the Country's future retires?

Cheers!