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Skullcandy, Inc. (SKUL) Message Board

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  • krug82 krug82 Nov 21, 2012 12:15 PM Flag

    SKUL - "How Short Sellers Fleece Investors.Here is how the short selling scheme works:

    True, but on the flip side, doesn't it also create a unique opportunity to pick up a great company at 4.5x EBITDA?

    Sentiment: Buy

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    • they “borrow” shares from the unwitting true shareholders. When a brokerage firm opens an account for a new customer, it is usually a “margin” account—one that allows the investor to buy stock on margin, or by borrowing against the investor’s stock. This is done although most investors never use the margin feature and are unaware that they have that sort of account. The brokers do it because they can “rent” the stock in a margin account for a substantial fee—sometimes as much as 30% interest for a stock in short supply. Needless to say, the real shareholders get none of this tidy profit. Worse, they can be seriously harmed by the practice. They bought the stock because they believed in the company and wanted to see its business thrive, not dive. Their shares are being used to bet against their own interests.

 
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