There are many reasons for shorts to be cautious at this point. 1- News of any new contract, which is very possible, may be announced one of these days. Mot, NOK, APPL and many others want a piece of this new technology (WFC) to compete against others. That may push OVTI price over 30% higher in one day. Last month 1.2 mil short shares were covered. Smart ones cover first.
2- Share buyback may be at its max with current prices. $11 has been multi year worst price and that happened when there was no hope for WFC and other issues. Now the future is more visible. Company share buyback confirms that. The float is shrinking and that will squeeze the shorts one way or another.
3- If OVTI decides to buyback all its shares under $13 with all its money, then it is able to buyback 27 mil shares. That leaves only 18 million shares and 2008 income will jump to $1.50/share based on 18 million shares. With PE of 15, that is translated to $22.5/share.
4- How about if a company targets OVTI for acquisition. That will kill shorts right away.
5- Any way you slice it, I do not see any hope for shorts. It is very dangerous to keep a short position in OVTI at this point unless someone wants to throw away his/her money.
Do you know that OVTI spent $73 million to buy back 5.3 millions shares at average of $13.50 in 2005. Just 14 month later today, the number of outstanding shares are about the same as before that buyback and the price is almost $3 less than before the buyback. Of course that $73 million disappeared from the company cash. Hong is trying to repeat the folly again to enrich option holders.
If he is an honorable person the first thing he should do is to stop his own insider sales how insignificantly small it may be. His insider sale at this juncture is morally indefensible, insultingly insenitive to its shareholders, the ugliest example of the greed and showing what is wrong with option abuses in the tech world. Many of my Chinese friends hope that Mr. Hong's greed will not be cited as a bad example of Chinese ethics.
Oh, come on. It is how he receives his compensation. Now, perhaps, his compensation is too high, but he is under contract. He exercises his options every week for tax and diversification reasons, as any rational person would. One shouldn't take it personally.