On May 16, 2011, Mercer International Inc. issued a press release announcing that it intends to redeem all of its 8.5% Convertible Senior Subordinated Notes due 2012 (the "Notes") on July 15, 2011 (the "Redemption Date"). The redemption price for the Notes will be 100% of the principal amount of the redeemed Notes, plus accrued and unpaid interest to, but not including, the Redemption Date. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Perhaps the change in short interest was related to the above noted press release and Converts? A holder of the notes could have essentially 'pre-sold' the shares into the market many months/years ago as a short and then in May 2011 received the shares when they converted the debenture into MERC shares, and used the new 1M shares to close out their short position. That could explain how the market didn't even flinch when the short was closed out.
Of course, if many of those new shareholders of the converts were to sell their shares into the market, the shares would decline, potentially pretty sharply. Is that what we are seeing, because NBSK just keeps going up?