SCO Group to be delisted

[Posted February 17, 2005 by corbet]

The SCO Group has put out a press release informing the world that it is being kicked out of the NASDAQ market for failure to comply with the reporting requirements. SCO is appealing the decision. "The Company has been unable to file its Form 10-K for the fiscal year ended October 31, 2004 because it continues to examine certain matters related to the issuance of shares of the Company's common stock pursuant to its equity compensation plans. The Company is working to resolve these matters as soon as possible and expects to file its Form 10-K upon completion of its analysis."

How does delisting affect shorted stock?

Posted Feb 17, 2005 16:12 UTC (Thu) by Duncan (guest, #6647) [Link] (3 responses)

So... what effect does delisting have on all those folks that have sold
SCOG stock short? That's of some signifcance for something as highly
shorted as SCOG is, but I haven't the foggiest whether this means they'll
never have to worry about being called upon to actually supply those
stocks, or if it'd simply make it harder to procure them if so called
upon, assuming they find some over-the-counter market to trade on.

Duncan

How does delisting affect shorted stock?

Posted Feb 17, 2005 17:25 UTC (Thu) by doodaddy (guest, #10649) [Link] (2 responses)

IANAStockBroker, but I tried to sell it short on day 3 and wasn't allowed (by my automated, on-line broker). I think there are rules against selling some piss poor stocks short or something.

How does delisting affect shorted stock?

Posted Feb 17, 2005 18:13 UTC (Thu) by iabervon (subscriber, #722) [Link]

Essentially, in order to sell stock short, you have to find someone willing to hold onto that amount of stock who is willing to sell it to you at the given time for a huge amount of money if necessary. Otherwise, the market risks there being a time when your shorted stock comes due and the total amount offered for sale is less than your obligation, in which case it wouldn't be possible to fulfill the requirements, regardless of money (since there's a limited amount of stock total, and not all owners are entertaining offers at all at any particular time). Note that the amount you can short is limited by the amount in reserve for covering shorts, not the amount on the market, because the stock on the market can be bought and held by people not paying attention.

What happened with SCO towards the beginning is that it was sufficiently shorted that it couldn't be shorted any more. In fact, SCOX later went up precipitously at times, when the shorts came due and there wasn't enough stock on the market to cover them at the market price. The issue isn't really that you aren't allowed to short bad stock, but you can't short the same thing that everybody else is shorting, or things that brokers aren't holding for this purpose.

How does delisting affect shorted stock?

Posted Feb 17, 2005 18:36 UTC (Thu) by jwb (guest, #15467) [Link]

Most retail brokerages have strict rules about shorting. For example many of them will not allow you to short a stock with a share price under $5. These rules are mainly in place to protect the broker from lawsuits. The online retail brokerages are a kind of padded kindergarten playground for investors. You can have a little fun, but it's not really dangerous.

"If I were an investor"

Posted Feb 17, 2005 16:25 UTC (Thu) by pyellman (guest, #4997) [Link] (2 responses)

"It is clearly a red light," said Laura DiDio, an analyst at The Yankee Group in Boston. "If I were an investor, I would be very concerned."

That's interesting. If _I_ were an investor, and _I_ was considering a course of action, _I_ would be looking for someone to sue or press charges against, and the name "Laura DiDio" would be quick to pop into _MY_ mind.

Peter Yellman

"If I were an investor"

Posted Feb 17, 2005 19:02 UTC (Thu) by gsc (guest, #6830) [Link]

Post of the day.

"If I were an investor"

Posted Feb 17, 2005 20:53 UTC (Thu) by cpm (guest, #3554) [Link]

Well said.