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Message: Re: Kodiak shorts

Dec 29, 2009 07:04PM

tau
Dec 29, 2009 08:35PM
3
Dec 29, 2009 09:11PM
1
Dec 29, 2009 09:20PM

Just a quick note about the number of shorts. To clear a "short", the shorter must buy shares in the market. The significance of the number of shares short is based on how easy it would be to buy those shares in the market, which in turn is based on how many shares are traded per day. Kodiak trades on average about half a million shares a day, so the 685k shares is about a day and a half's worth of shares. Anything under 3 days worth of shares is usually considered not significant. In Kodiak's case, shorters could clear their shorts in a week by buying a little over 100k shares a day- an increase in volume that wouldn't draw attention and probably would not affect the sp very much. Of course, I wouldn't want to be short if Kodiak announced after hours that they had hit the motherlode and the shares opened at triple the previous day's closing price- but that's the chance the shorters take.

Another comment- the 685k represents the "official" number of shorts- shorts in which the shares have been officially "borrowed" and sold. If I remember correctly, the shares don't have to be borrowed before they are sold, as long as the broker is sure they can identify and borrow the shares within a short time frame, 3 days I think. If the broker "forgets" to borrow the shares, then it becomes a naked short- one which is not official and not reported. The 685k does not include these naked shorts, so there can actually be a lot more than the official number.

I'm no expert, but I think this is basically correct. I'm sure there's more on the web- start w/ investopedia if you're interested.

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