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CHINA BIOTICS INC Message Board

  • zirdu zirdu Sep 10, 2010 7:12 PM Flag

    Short Interest

    Short interest for 8/31/2010 has just been posted. For CHBT it was 4,029,713 shares sold short as of that date. Up 13% from the last report, which was as of 8/13/2010. So at least as of 8/31 we know the shorts are increasing their bet.

    http://www.nasdaqtrader.com/Trader.aspx?id=ShortInterest

    For those who do not know exactly how this works: CHBT has about 22 million shares issued and outstanding. As of 8/31, the shorts have borrowed 4 million of those shares, and sold them to new longs. This makes for a total of 26 million shares now held by longs, and 4 million shares short. Shares held long minus shares short HAS to always equal shares outstanding. So the process of shorting a stock actually increases the float.

    Imagine the 4 million shorts did nothing in the next 6 months, just held their position, and there were no more shares shorted. That would mean that CHBT would trade as if it has 26 million shares out. Of course this isn't too realistic, as shorts cover and more shares are shorted constantly.

    Another myth is that shorts "have" to cover (i.e. by shares on the open market to give back to the party they borrowed the shares from in the first place) by some particular time, or if the stock gets to some particular level. Not so. A short can, if he has the margin power available, keep on a short for as long as he likes, and never ever cover it. Sometimes of course they may be forced to do so, if the stock is taken over by another company. And sometimes, if the person from whom they shorted sells thier shares, they may be required to cover if their broker cannot find other shares to borrow. But absent those circumstances, they usually never have to cover.

    The following things put pressure on shorts (1) putting your shares in a cash account, such as an IRA or just a seperate cash account, and not a margin account, (2) a share buyback, (3) higher stock prices, especially higher than the price at which they shorted (we have a long way to go to get to this point).

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