Monday, March 25, 2013

Naked short selling leaves companies exposed

Too often, investing is like a game of golf that changes with the conditions.

While trading of its stock in February neared its high in July, Zynga has gone from the naked short selling list of FINRA, the securities regulatory agency, to a possible acquisition target of Yahoo.

Like golf, the challenge of investing grow with constantly
changing conditions that leave the player exposed. 
Almost 60 million additional shares were subjected to naked short selling Feb. 8-12 before the maker of such popular Facebook games such as Farmville started showing up in FINRA's daily Reg SHO reports.

Wes Christian, partner at Christian Smith & Jewell, said naked short selling in general destroys equity and leaves the original stock owners with a tiny sliver left from their original investment.

"If you're a short seller and you abide by all the rules governing short sales, then fine – it's legitimate, legal. It's proper. That's not what's going on in Wall Street," said the partner at the Houston law firm.

"What's going on in Wall Street is happening and we're seeing it in many other companies is a rigged system."

Zynga had a short volume of 1,990,050, a short exempt volume of 26,300 and a total volume of 2,897,882 on Feb. 11.

Victims of naked short selling end up with their stock devalued and the investors trying to recoup their investment.

Investors create situations of illegal naked short selling when they put up IOUs that can't be honored and have no intention of selling.

A by-product of counterfeit shares is created because short sellers effectively put additional shares in to the market.

"So many fail to deliver," said Christian. "The shares are identified as sold but they are never delivered... Also, the sales are marked as long and this doesn't classify them as short sales, when in fact they are."
 

In a time of federal budget crunching and sequestration, enforcement by the judicial branch or intervention by beleaguered legislators seems like a long shot.

Only the right approach and an experienced team can get a company back in control of its own stock and back to the top of the leaderboard.

Christian Smith & Jewell were part of the team that fought on behalf of Taser stockholders in the Northern District of Georgia's U.S. District Court in 2011 and earned a settlement with a host of Wall Street firms.

“These are not isolated incidents: we believe the trading data evidences an ongoing and coordinated effort to violate securities and other laws,” said Christian when the suit was filed.

If you think that your stock is being manipulated, please contact us at 713-659-7617.















No comments:

Post a Comment