guy 2 may have been right and the company was only worth $50...

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oneuponedown

181 Posts.

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10/01/20

21:02

Post #: 42327990
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Originally posted by oneuponedown: ↑

Hold strong it’s tempting with the grim forecast for2020 prices and recent kick but with SQM expansion being recently rejected by Chilean govt the low cost production will be capped and everyone else (high cost spod) will not increase production until LCE stabilises above 10,000/tonne. shorts can’t cover if no one sells. Can all but guarantee there is 15% of shares that wont be sold.
Simplified demonstration of short burn(before electronic but principle and reality is the same)
company lists 100 shares at $1.
one shareholder buys all 100 shares.
Guy2 decides stocks only worth 50c I know I’ll sell guy1s 100shares for $1ea (even though I don’t own them) to guy 3 then I’ll buy them back off guy 3 for 50c when he realises that’s all they are worth, then give them back to guy 1 and make $50.
guy 4 comes along before guy 3 wants to sell his shares and says to guy 1 I want to buy your 100 shares for $2ea.
Guy 1 agrees and goes to get his shares out of his draw where he sees an IOU from guy 2 saying I have borrowed your shares give me a call when you want them back.
guy 2 then panicked and calls guy3 saying hey mate I need those shares back, guy 1 wants to sell them to guy4
guy3 says no worries I’ll sell them to you for $100ea. Guy2 is now faced with the predicament of going to jail or buying the shares back off guy3 for $10,000.
not as easy with thousands of shareholders but when the burn starts hold tight as chasing a small day trade gain is no where near as satisfying landing a 5 bagger

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guy 2 may have been right and the company was only worth $50 (50c a share) but he had to pay $10,000 for it and never actually own it. Guy 1 was happy he doubled his money. Guy 4 had just bought the company for $200 and is the sole owner of a company that may only be worth $50 according to guy2.
Guy3 made $9900 and gave half to his brother guy 3 who still owns the company of unknown value until he decides to sell and someone wants to buy at an agreed price

ORE Price at posting: $3.40 Sentiment: Buy Disclosure: Held
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