Well we’re there. This is it, the “washout”, the time when they get even some of the diehard shareholders to throw in the towel. There are only three motivations for investing in the market – Pride, Greed and Fear. This is the “fear” stage. The shorts need this emotion to cover their shorts positions. Where are they going to get all that stock unless they get you to part with yours? No one knows how big the real short position is. There are 32,000,000 REPORTED shares , but in today’s world where the regulators don’t enforce the shorting rules, and the weasel funds and market makers just move positions around to prevent enforcement of the mandatory buy-in rules, there could be another 30 million shorts, and maybe more. So covering will be a big assignment. Some may be planning on not covering, hoping Star will go out of business, but that’s not going to happen. At these prices friends of the company might just as well “take it private.” A big pharma might just make an offer. Maybe even a tobacco company (Japan Tobacco which also is in health care business?) The science will survive so the company will too, in one form or another, so these guys WILL have to cover. So ask yourself, would you rather be shorting today with the possibility of making no more than $1.33 on the upside, or buying a remarkable new science with unlimited upside in a company where one of its biggest medical collaborators who understands the science best has already bought stock at $4 a share?
I figure if it’s that easy a call for me. It will be for some institutions too, maybe some hedge funds who want to get ahead of those 10’s of millions of covering that’s coming.
You deserve at least one reply saying how well thought out your post was, and how well it makes the case for going long on STSI. Now that you mention it, the ONLY question for investors at this price level is this: will STSI go out of business? (And I don't mean via a buyout). If your answer is no, it won't, then buying at these prices is logical. If your answer is yes,STSI will go out of business, then you should have sold your shares a long time ago.
Anybody still owning shares at this point should NOT be worried about STSI going out of business. Thus, the shorts will have to contend with trying to get the believers to part with their shares. Good luck with that.