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BIOLASE, Inc. Message Board

  • hero_arrested hero_arrested May 16, 2003 10:53 AM Flag

    Institutions up to 18% ownership

    This is beginning to put a whole new complexion to the equation. If my guess is correct, and the new short figure is up to 4.3 mil as of the 15th, there are a lot of shorts between 7 and 12... BLTI starts to inch toward 14 over next few weeks, they start to lose more than their original investment.

    With institutions holding 3 times as much stock as they did at the beginning of the year, they typically hold stock for longer periods of time and the sell side/profit takers provide less volume, thus the ratio of sell side pressure from profit taking to new shorts, will really start to swing to new shorts. Eventually the shorts have to realize they're throwing good money after bad, especially when they start losing more than their original investment (problem with shorting stock, if stock doubles in price, everything over that is additional capital to buy stock back....reason most brokerages won't allow short under $5). When this happens, and shorts start to finally cover, going from sell side to buy side, this could get freaky.

    One thing I've noticed lately, is short commentators on all boards and TV, are extremely cocky, mostly, because they have been right for the last 4 years on just about every stock. But, in my opinion they act as though nothing can go wrong for them, they are not worried at all, and will continue to keep shorting, because they think this is a bull run in a bear market, and will go right back down. My take on this attitude, is that it is exactly the same cockiness that got the people in trouble that bought EMC at $100, CMGI at $150 and so on. Their reasoning was flawed as everyone has seen, as no one buying technology in 1999 realized the true effect of Y2K, and that was the boom in IT spending to make sure computers all ran after 1/1/2000. Once that golden rainbow dried up, IT had to go back to adjust for all that spending and is just now starting to hint at spending again. But it will no where near pree y2k levels.

    Anyway, my point being, I think the shorts overall, are in for a wakeup call, as the 2.5 trillion in cash, sitting in mutual funds, slowly but surely comes back into the market, as it's done since the War uncertainty has ended.

    The short strategy problem I see, is it's one thing to short a stock market sitting at all time highs, it's another thing to short it at 40 year lows. I'm not saying the Nasdaq will go back to 5,000 in a hurry, but as it starts to creep back to the 2000 level over the summer, I think the pressure on shorts will really start to mount, and the effect will devastate a lot of hedge funds that, unlike a buying side, when the stock is worthless, your money is gone...after a stock doubles and you owe more than original investment, the snowball effect of this will be interesting to watch.

    Just my view of the world, take it for what it's worth, lol

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