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Short sellers are in Nirvana with these creatures that had surged by hundreds or even thousands of percent in days after they announced a switch to "blockchain" in their business model or added "Blockchain" to their name. Their shares are now crashing.
I have written about a number of these outfits and their crazy share-price moves and their silly stock manipulation schemes on the way up. Now, not much later, here's an update on how they're doing on the way down.
This is a true gem. On January 9, the SEC halted trading in UBIA shares, citing two reasons: "accuracy" in UBI's disclosures and very funny trading activity. This froze the share price at $22. The trading halt came 11 days after I'd lambasted the shenanigans by the company and its executives. On Tuesday (January 23), shares trading resumed – and have since plunged to $8.25.
What caused the surge was the December 15 announcement – a mix of gobbledygook, hype, and silliness, as I called it – that it had acquired a "Blockchain-empowered solutions provider," etc. etc. What was not in the announcement was that the acquired "assets" belonged to a Singapore corporation that is 95% owned by Longfin's CEO and chairman. This was disclosed in the SEC filings, but no one betting on this crazy stuff reads SEC filings.
[...] For speculators that were able to get into and out of these scams in time, it worked. A 1,000% gain obtained in a few days by hook or crook is nothing to sneeze at. But it's ending in tears for those who got into these scams too late and whose despised fiat currency just ended up providing the exit grease for early speculators. And short sellers, the lucky ones that got the timing right, are laughing all the way to the hated legacy banks.
But not all will get the timing right. Short sellers, when they want to take profits, have to buy their shares back in order to cover their short position, and many of the stocks are thinly traded, and covering a big short position can cause shares to bounce violently. So there will be some serious snap-backs, which might take the fun out of shorting these stocks.
(Score: 2) by Virindi on Tuesday January 30 2018, @12:41AM
Informative.
The more trade volume there is in a given thing, the less effect there is to the price when you buy or sell that thing. Any trade has a negative effect on the market price.
If you short, the price goes down during your sale. If you buy shares, the price goes up during your buy. When covering a short, the price goes up during your buy.
If your trades are small enough, the effect is essentially lost in the noise, but the definition of "small enough" is based on trade volume. Even big name stocks tend to have volume which only allows "millions" (not tens, hundreds, or billions) before effects are noticed.
There is an alternative though: whole-market indexes. Those things have so much volume that the richest people in the world could do big trades and barely be noticed. But, you'd have to have an idea about what the whole market will do.