Innocent enjoyment

Innocent enjoyment

Posted Aug 23, 2007 14:09 UTC (Thu) by Duncan (guest, #6647)
In reply to: Innocent enjoyment by giraffedata
Parent article: A bad day for the SCO Group

> [A]n equal number of people scurried around trying
> to be the first to buy, believing that people had
> overreacted to the news over the weekend and the
> price they were asking was too low.

That's not necessarily the case. Remember, SCO was very heavily shorted.
What I'd like to see would be a graphic of what it was shorted vs. what
it's shorted now. I'd bet that a lot of that buying was simply people
covering their shorts. If they'd "borrowed" stock to sell at two or even
three dollars, a sudden drop to 50 cents might seem a very good time to
cover their shorts.

In fact, IMO that's pretty much the only thing that explains that much
volume even at 50 cents a share, given that as everyone has already
pointed out, there must be a buyer for every seller, and a seller (even if
shorting, borrowing from someone to do so) for every buyer.

Posting from the viewpoint of nearing two weeks after the original event,
it's also worth noting that the stock is still pretty much flatlining at
between 40 and 50 cents, tho it has gradually risen about 10 cents from
its low of 35 cents, to ~46 cents. It's going to be interesting to see if
it can climb above 50 cents and stay there, tho I imagine that's the
near-term goal at SCO.

What's really amusing is seeing the last change as I'm viewing ATM,
+0.006, as +1.33%. The effects of sub-dollar prices on volatility are
well known and a big reason NASDAQ delists if stocks stay that way for too
long... tho it takes several months sub-dollar to get delisted, so SCO's
not in any immediate danger of delisting from price after only a couple
weeks or so. Another 1-for-4 or stronger reverse split, taking the stock
to nearly $2 again at current values, seems likely if SCO wishes to stay
listed and a steep rise doesn't come its way in the next few months. That
can't go on forever, obviously, but from the analysis I saw previously,
SCO still has a bit of room to maneuver in that area, to 1-for-8 or so
IIRC. Keep in mind however that reverse splits often lose much of their
increased per-share value in the weeks after such an event, however, so
SCO would be wise to go at least 1-4-5 and 1-4-8 may be it.

Assuming they don't just decide to let it go, now, off NASDAQ and off the
big RADAR.

Duncan

---

(Log in to post comments)

>> [A]n equal number of people scurried around trying
>> to be the first to buy, believing that people had
>> overreacted to the news over the weekend and the
>> price they were asking was too low.
>
>That's not necessarily the case. Remember, SCO was very
>heavily shorted. What I'd like to see would be a graphic
>of what it was shorted vs. what it's shorted now. I'd bet
>that a lot of that buying was simply people covering their
>shorts. If they'd "borrowed" stock to sell at two or even 
>three dollars, a sudden drop to 50 cents might seem a very
>good time to cover their shorts.