While I have owned a lot of stocks over the years, I have never held a position where the issue was so heavily shorted as GMCR. Having never shorted a stock, I am trying to understand the dynamics of the situation with GMCR. Please let me know if I have connected the dots incorrectly here.
It seems to me that the damage to share price that caused by short sales occurs while the percentage of the float shorted is increasing. That is, as shares are borrowed and sold, downward pressure is exerted on share price. Once a particular set of shares is sold short, it really doesn't have any more influence.
So when the stock is so heavily shorted that there are no more shares available to short (which seems to be the current situation with GMCR), there doesn't seem to be a mechanism whereby the shares already shorted affect share price.
Please correct me if I am wrong, but if GMCR is totally maxed-out in terms of shortability, and still rising and approaching an all-time high, isn't that really kind of a bullish sign? Doesn't that mean that, by definition, pretty much every short share has a paper loss at this point?
If I have made any incorrect assumptions here, please hold your flames and point out where I have erred.
They clearly can't do too much shorting *legally* while there are no (or precious few) shares to borrow, but they can NAKED short the stock still...and plainly are, as GMCR has been on the Regulation SHO list (one of only four NASDAQ stocks there, BTW) for about a week now. It was on at least one time in the past, but went back off within a few days. This time..."it's personal", lol.
It's a damn shame we can't see the number of fails to deliver as it modulates from day-to-day, as that would be a good sign of the shorts' desparation. But you know they've got to be sweating buckets over the threat of increased enforcement of naked shorting, and the up-tick rule reinstatement.
I'm feeling pretty good right now, as a GMCR long. I was driving around today worried my limit orders at 50+ (as per the suggestion posted earlier) would trigger in a short squeeze and I'd lose out on the subsequent run-up! (Okay, it was just a fantasy...)