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Post by Keybridge - Cult Member 003 on Dec 10, 2014 22:44:34 GMT
Short data is in for today. Big drop in volume for the shories. Is that because they already have their position and are waiting? I wish I had the answer. Interesting though. otcshortreport.com/index.php?index=ocat&action=view#.VId5vDHF-5JDate VolShorted High Low Close ShortVol RegularVol Dec 09 21.72% NA NA NA 36,246 166,900 Dec 08 47.09% 6.98 6.76 6.82 104,628 222,187 Dec 05 45.01% 7.05 6.35 6.68 92,825 206,227 Dec 04 56.04% 6.35 5.96 6.31 97,517 174,024 Dec 03 41.04% 6.23 5.85 5.96 133,179 324,507 Today: Date VolShorted High Low Close ShortVol RegularVol Dec 10 38.74% NA NA NA 50,996 131,652 Dec 09 21.72% 7.04 6.40 6.76 36,246 166,900 Dec 08 47.09% 6.98 6.76 6.82 104,628 222,187 Dec 05 45.01% 7.05 6.35 6.68 92,825 206,227 Man, this is bound to create some volatility. |
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Post by tradeup on Dec 10, 2014 23:07:53 GMT
And why wouldn't this be Jefferies, for example, shorting the stock? Seems like a no brainer (covering opportunity via the 1.5M over-allotment).
From the prospectus ...
Stabilization
The underwriters have advised us that, pursuant to Regulation M under the Securities Exchange Act of 1934, as amended, certain persons participating in the offering may engage in short sale transactions, stabilizing transactions, syndicate covering transactions or the imposition of penalty bids in connection with this offering. These activities may have the effect of stabilizing or maintaining the market price of the common stock at a level above that which might otherwise prevail in the open market. Establishing short sales positions may involve either "covered" short sales or "naked" short sales.
"Covered" short sales are sales made in an amount not greater than the underwriters' option to purchase additional shares of our common stock in this offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares of our common stock or purchasing shares of our common stock in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares of common stock available for purchase in the open market as compared to the price at which they may purchase shares through the option to purchase additional shares.
"Naked" short sales are sales in excess of the option to purchase additional shares of our common stock. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares of our common stock in the open market after pricing that could adversely affect investors who purchase in this offering.
A stabilizing bid is a bid for the purchase of shares of common stock on behalf of the underwriters for the purpose of fixing or maintaining the price of the common stock. A syndicate covering transaction is the bid for or the purchase of shares of common stock on behalf of the underwriters to reduce a short position incurred by the underwriters in connection with the offering. Similar to other purchase transactions, the underwriters' purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. A penalty bid is an arrangement permitting the underwriters to reclaim the selling concession otherwise accruing to a syndicate member in connection with the offering if the common stock originally sold by such syndicate member is purchased in a syndicate covering transaction and therefore has not been effectively placed by such syndicate member.
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Post by jckrdu on Dec 10, 2014 23:23:52 GMT
And why wouldn't this be Jefferies, for example, shorting the stock? Seems like a no brainer (covering opportunity via the 1.5M over-allotment). From the prospectus ... Stabilization The underwriters have advised us that, pursuant to Regulation M under the Securities Exchange Act of 1934, as amended, certain persons participating in the offering may engage in short sale transactions, stabilizing transactions, syndicate covering transactions or the imposition of penalty bids in connection with this offering. These activities may have the effect of stabilizing or maintaining the market price of the common stock at a level above that which might otherwise prevail in the open market. Establishing short sales positions may involve either "covered" short sales or "naked" short sales. "Covered" short sales are sales made in an amount not greater than the underwriters' option to purchase additional shares of our common stock in this offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares of our common stock or purchasing shares of our common stock in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares of common stock available for purchase in the open market as compared to the price at which they may purchase shares through the option to purchase additional shares. "Naked" short sales are sales in excess of the option to purchase additional shares of our common stock. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares of our common stock in the open market after pricing that could adversely affect investors who purchase in this offering. A stabilizing bid is a bid for the purchase of shares of common stock on behalf of the underwriters for the purpose of fixing or maintaining the price of the common stock. A syndicate covering transaction is the bid for or the purchase of shares of common stock on behalf of the underwriters to reduce a short position incurred by the underwriters in connection with the offering. Similar to other purchase transactions, the underwriters' purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. A penalty bid is an arrangement permitting the underwriters to reclaim the selling concession otherwise accruing to a syndicate member in connection with the offering if the common stock originally sold by such syndicate member is purchased in a syndicate covering transaction and therefore has not been effectively placed by such syndicate member. Yep, always good to read the prospectus. |
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Post by HeyNow on Dec 11, 2014 0:02:53 GMT
Tradeup and Jck - what are you two suggesting? Are you suggesting the underwriters are shorting the stock in the open market today and this week? Not a rhetorical question, I'm genuinely curious if that's really what you mean to say.
I would implore you to re-read this sentence in that description:
"These activities may have the effect of stabilizing or maintaining the market price of the common stock at a level above that which might otherwise prevail in the open market"
and this one:
"The underwriters have advised us that, pursuant to Regulation M under the Securities Exchange Act of 1934, as amended, certain persons participating in the offering may engage in short sale transactions, stabilizing transactions, syndicate covering transactions or the imposition of penalty bids in connection with this offering"
It says the activities are meant to stabilize the pps or keep it at a level above that which might otherwise prevail, not hinder it or make the underwriters money through some riskless transaction. That's because the mechanics of an offering with an overallotment option go like this:
Jefferies et al. go out and sell 11.5 million shares (1.5 million more then the offering). This way, they have oversold the offering shares made available and are now "short" 1.5 million shares. There are two scenarios in which they will cover their short, after the offering closes:
1. The share price stays the same or goes up after the offering - Jefferies et al are permitted under the terms of the overallotment option to cover at the offering price, hence closing their short position at the short sale price. The greenshoe option ensures their short position has no risk of losing money
2. The share price declines after the offering. Jefferies et al. would now be able to cover their short position by buying in the open market at prices lower then their short position (offering price). They would make money on their short while simultaneously supporting the pps in the market following the offering.
For the underwriters, there is no risk in their short position and they may even profit if the stock trades down after the offering. and in both scenarios they make extra commission on the overaloltment shares. For OCAT, they are provided some support level at the offering price by the underwriters who are short. It is a win-win. Once the overallotment short position is covered, the prevailing market conditions, if there is weakness, will be revealed. That is why the prospectus says this: "These activities may have the effect of stabilizing or maintaining the market price of the common stock at a level above that which might otherwise prevail in the open market."
The underwriters are working with OCAT, not against them. I'll ask again - are you saying that Jefferies is likely shorting OCAT on the open market right now?
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Post by ridda on Dec 11, 2014 0:22:17 GMT
I also think the underwriters could be shorting. I could be completely off in my thinking but I assumed the ability for them to short the stock during the pricing period would act as a good indicator for them to determine where the bottom is with the share price. Again I am far from saying this is the case but it makes sense to me. But what do I know. I digress.
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Post by Keybridge - Cult Member 003 on Dec 11, 2014 0:59:47 GMT
When in doubt, I do what Trade would do (I joke) - Look up Wiki:
(Google: Greenshoe Option)
"Greenshoe option is a special provision in an IPO prospectus, which allows underwriters to sell investors more shares than originally planned by the issuer. This would normally be done if the demand for a security issue proves higher than expected. Legally referred to as an over-allotment option. In simple context. A greenshoe option (sometimes green shoe, but must[1] legally be called an "over-allotment option" in a prospectus) allows underwriters to short sell shares in a registered securities offering at the offering price. The greenshoe can vary in size and is customarily not more than 15% of the original number of shares offered.
The greenshoe option is popular because it is one of few SEC-permitted, risk-free means for an underwriter to stabilize the price of a new issue post-pricing. Issuers will sometimes not include a greenshoe option in a transaction when they have a specific objective for the proceeds of the offering and wish to avoid the possibility of raising more money than planned. The term comes from the first company, Green Shoe Manufacturing (now called Stride Rite Corporation),[2] to permit underwriters to use this practice in an offering. The option was used by the underwriters of the Alibaba IPO in September 2014, making the IPO the largest in world history.
The greenshoe option provides stability and liquidity to a public offering. For example, a company intends to sell one million shares of its stock in a public offering through an investment banking firm (or group of firms, known as the syndicate) which the company has chosen to be the offering's underwriters. Stock offered for public trading for the first time is called an initial public offering or IPO. Stock that is already trading publicly, when a company is selling more of its non-publicly traded stock, is called a follow-on or secondary offering.
The underwriters function as the brokers of these shares and find buyers among their clients. A price for the shares is determined by agreement between the company and the buyers. When shares begin trading in a public market, the lead underwriter is responsible for helping to ensure that the shares trade at or above the offering price.
When a public offering trades below its offering price, the offering is said to have "broke issue" or "broke syndicate bid." This creates the perception of an unstable or undesirable offering, which can lead to further selling and hesitant buying of the shares. To manage this situation, the underwriters initially oversell ("short") the offering to clients by an additional 15% of the offering size (in this example, 1.15 million shares). When the offering is priced and those 1.15 million shares are "effective" (become eligible for public trading), the underwriters are able to support and stabilize the offering price bid (also known as the "syndicate bid") by buying back the extra 15% of shares (150,000 shares in this example) in the market at or below the offer price. The underwriters can do this without the market risk of being "long" this extra 15% of shares in their own account, as they are simply "covering" (closing out) their short position.
When the offering is successful, demand for shares causes the price of the stock to rise and remain above the offering price. If the underwriters were to close their short position by purchasing shares in the open market, they would incur a loss by purchasing shares at a higher price than the price at which they sold them short.
The greenshoe (over-allotment) option would now come into play. The company had initially granted the underwriters the option to purchase from the company up to 15% more shares than the original offering size at the original offering price. By exercising their greenshoe option, the underwriters are able to close their short position by purchasing shares at the same price for which they short-sold the shares, so the underwriters do not lose money.
If the underwriters are able to buy back all of the oversold shares at or below the offering price (to support the stock price), then they would not need to exercise any portion of their greenshoe option. If they are able to buy back only some of the shares at or below the offer price (because the stock eventually rises higher than the offer price), then the underwriters would exercise a portion of greenshoe option to cover their remaining short position. If the underwriters were not able to buy back any portion of the oversold shares at or below the offering price ("syndicate bid") because the stock immediately rose and stayed up, then they would completely cover their 15% short position by exercising 100% of their greenshoe option."
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Post by tradeup on Dec 11, 2014 1:08:22 GMT
Tradeup and Jck - what are you two suggesting? Are you suggesting the underwriters are shorting the stock in the open market today and this week? Not a rhetorical question, I'm genuinely curious if that's really what you mean to say. I would implore you to re-read this sentence in that description: "These activities may have the effect of stabilizing or maintaining the market price of the common stock at a level above that which might otherwise prevail in the open market" and this one: "The underwriters have advised us that, pursuant to Regulation M under the Securities Exchange Act of 1934, as amended, certain persons participating in the offering may engage in short sale transactions, stabilizing transactions, syndicate covering transactions or the imposition of penalty bids in connection with this offering" It says the activities are meant to stabilize the pps or keep it at a level above that which might otherwise prevail, not hinder it or make the underwriters money through some riskless transaction. That's because the mechanics of an offering with an overallotment option go like this: Jefferies et al. go out and sell 11.5 million shares (1.5 million more then the offering). This way, they have oversold the offering shares made available and are now "short" 1.5 million shares. There are two scenarios in which they will cover their short, after the offering closes: 1. The share price stays the same or goes up after the offering - Jefferies et al are permitted under the terms of the overallotment option to cover at the offering price, hence closing their short position at the short sale price. The greenshoe option ensures their short position has no risk of losing money 2. The share price declines after the offering. Jefferies et al. would now be able to cover their short position by buying in the open market at prices lower then their short position (offering price). They would make money on their short while simultaneously supporting the pps in the market following the offering. For the underwriters, there is no risk in their short position and they may even profit if the stock trades down after the offering. and in both scenarios they make extra commission on the overaloltment shares. For OCAT, they are provided some support level at the offering price by the underwriters who are short. It is a win-win. Once the overallotment short position is covered, the prevailing market conditions, if there is weakness, will be revealed. That is why the prospectus says this: "These activities may have the effect of stabilizing or maintaining the market price of the common stock at a level above that which might otherwise prevail in the open market." The underwriters are working with OCAT, not against them. I'll ask again - are you saying that Jefferies is likely shorting OCAT on the open market right now? Lol. Yes, of course they are shorting. Jefferies is currently a Market Maker. They are heavily involved in the daily shorting. You are in over your head, HeyNow! |
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Post by JHam on Dec 11, 2014 1:25:10 GMT
And why wouldn't this be Jefferies, for example, shorting the stock? Seems like a no brainer (covering opportunity via the 1.5M over-allotment). From the prospectus ... Stabilization The underwriters have advised us that, pursuant to Regulation M under the Securities Exchange Act of 1934, as amended, certain persons participating in the offering may engage in short sale transactions, stabilizing transactions, syndicate covering transactions or the imposition of penalty bids in connection with this offering. These activities may have the effect of stabilizing or maintaining the market price of the common stock at a level above that which might otherwise prevail in the open market. Establishing short sales positions may involve either "covered" short sales or "naked" short sales. "Covered" short sales are sales made in an amount not greater than the underwriters' option to purchase additional shares of our common stock in this offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares of our common stock or purchasing shares of our common stock in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares of common stock available for purchase in the open market as compared to the price at which they may purchase shares through the option to purchase additional shares. "Naked" short sales are sales in excess of the option to purchase additional shares of our common stock. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares of our common stock in the open market after pricing that could adversely affect investors who purchase in this offering. A stabilizing bid is a bid for the purchase of shares of common stock on behalf of the underwriters for the purpose of fixing or maintaining the price of the common stock. A syndicate covering transaction is the bid for or the purchase of shares of common stock on behalf of the underwriters to reduce a short position incurred by the underwriters in connection with the offering. Similar to other purchase transactions, the underwriters' purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. A penalty bid is an arrangement permitting the underwriters to reclaim the selling concession otherwise accruing to a syndicate member in connection with the offering if the common stock originally sold by such syndicate member is purchased in a syndicate covering transaction and therefore has not been effectively placed by such syndicate member. Because it must be manipulation! Lol! tradeup I agree. The first thing that came to mind was this section of the prospectus which I haves posted 2 or 3 times now so that people wouldn't be surprised when Jeffries started to short the stock. It makes sense. |
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Post by jckrdu on Dec 11, 2014 1:29:58 GMT
Tradeup and Jck - what are you two suggesting? Are you suggesting the underwriters are shorting the stock in the open market today and this week? Not a rhetorical question, I'm genuinely curious if that's really what you mean to say. I would implore you to re-read this sentence in that description: "These activities may have the effect of stabilizing or maintaining the market price of the common stock at a level above that which might otherwise prevail in the open market" and this one: "The underwriters have advised us that, pursuant to Regulation M under the Securities Exchange Act of 1934, as amended, certain persons participating in the offering may engage in short sale transactions, stabilizing transactions, syndicate covering transactions or the imposition of penalty bids in connection with this offering" It says the activities are meant to stabilize the pps or keep it at a level above that which might otherwise prevail, not hinder it or make the underwriters money through some riskless transaction. That's because the mechanics of an offering with an overallotment option go like this: Jefferies et al. go out and sell 11.5 million shares (1.5 million more then the offering). This way, they have oversold the offering shares made available and are now "short" 1.5 million shares. There are two scenarios in which they will cover their short, after the offering closes: 1. The share price stays the same or goes up after the offering - Jefferies et al are permitted under the terms of the overallotment option to cover at the offering price, hence closing their short position at the short sale price. The greenshoe option ensures their short position has no risk of losing money 2. The share price declines after the offering. Jefferies et al. would now be able to cover their short position by buying in the open market at prices lower then their short position (offering price). They would make money on their short while simultaneously supporting the pps in the market following the offering. For the underwriters, there is no risk in their short position and they may even profit if the stock trades down after the offering. and in both scenarios they make extra commission on the overaloltment shares. For OCAT, they are provided some support level at the offering price by the underwriters who are short. It is a win-win. Once the overallotment short position is covered, the prevailing market conditions, if there is weakness, will be revealed. That is why the prospectus says this: "These activities may have the effect of stabilizing or maintaining the market price of the common stock at a level above that which might otherwise prevail in the open market." The underwriters are working with OCAT, not against them. I'll ask again - are you saying that Jefferies is likely shorting OCAT on the open market right now? Thanks for that explanation HeyNow, it makes sense. I have no idea if any of the underwriters are shorting OCAT right now. I would hope not for the reason you stated; they're working with OCAT right now... and while they're not a top tier investment bank, they're a lot better than a firm like Aegis where I would be a lot more concerned with the interests of all parties being aligned. So on one hand I don't think they're working against OCAT and betting that the stock price falls after the pricing is announced by taking short positions now, but on the otherhand the bottomline is that the prospectus clearly says they can short OCAT "in connection" with this offering. So, (IMO) if its in their financial interest to short OCAT now, I guess I feel that they'd be finding a way to do it. I remember watching a piece on 60 Minutes years ago during the financial crisis where they were doing a segment on Goldman Sachs on this exact issue; one branch of GS was doing these deals (IPOS, mergers, etc) for their customers, and another branch was taking short positions betting on the belief that the transaction would fail in the market. |
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Post by actcfan on Dec 11, 2014 1:33:28 GMT
I read it slightly different than either the Hatfields or McCoys..
The underwriters have advised us that, pursuant to Regulation M under the Securities Exchange Act of 1934, as amended, certain persons participating in the offering may engage in short sale transactions, stabilizing transactions, syndicate covering transactions or the imposition of penalty bids in connection with this offering. These activities may have the effect of stabilizing or maintaining the market price of the common stock at a level above that which might otherwise prevail in the open market.
To me, above they are saying that the underwriters advised OCATA that certain persons, which I take to mean people potentially buying into the offering (but could also mean underwriters), may engage in other transactions. Those transactions include short sales AND/OR stabilizing transactions. And if you were buying into the offering and you felt confident you were going to be able to buy it at a price lower than it is trading, why would you not short it? if you are right there is almost no risk in the transaction. For people who are not familiar, when you short a stock you are basically borrowing to sell. So why would they not borrow 1000 shares to sell at $7 (or $6.50 or whatever) if you are confident (because you are an institutional investors and know more about these transactions than any of us on this board) that the price will be lower in the offering and you are buying those 1000 shares anyway? I mean isn't it basically just a covered call except you are far more certain of the outcome? Correct me if I am wrong.
I said this last week, but the people on wall street are not rich by accident just like Casino's in Vegas aren't luxurious because you can beat their table games. They are going to get a good deal. JMHO
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Post by CM kipper007 on Dec 11, 2014 1:38:23 GMT
Tradeup and Jck - what are you two suggesting? Are you suggesting the underwriters are shorting the stock in the open market today and this week? Not a rhetorical question, I'm genuinely curious if that's really what you mean to say. I would implore you to re-read this sentence in that description: "These activities may have the effect of stabilizing or maintaining the market price of the common stock at a level above that which might otherwise prevail in the open market" and this one: "The underwriters have advised us that, pursuant to Regulation M under the Securities Exchange Act of 1934, as amended, certain persons participating in the offering may engage in short sale transactions, stabilizing transactions, syndicate covering transactions or the imposition of penalty bids in connection with this offering" It says the activities are meant to stabilize the pps or keep it at a level above that which might otherwise prevail, not hinder it or make the underwriters money through some riskless transaction. That's because the mechanics of an offering with an overallotment option go like this: Jefferies et al. go out and sell 11.5 million shares (1.5 million more then the offering). This way, they have oversold the offering shares made available and are now "short" 1.5 million shares. There are two scenarios in which they will cover their short, after the offering closes: 1. The share price stays the same or goes up after the offering - Jefferies et al are permitted under the terms of the overallotment option to cover at the offering price, hence closing their short position at the short sale price. The greenshoe option ensures their short position has no risk of losing money 2. The share price declines after the offering. Jefferies et al. would now be able to cover their short position by buying in the open market at prices lower then their short position (offering price). They would make money on their short while simultaneously supporting the pps in the market following the offering. For the underwriters, there is no risk in their short position and they may even profit if the stock trades down after the offering. and in both scenarios they make extra commission on the overaloltment shares. For OCAT, they are provided some support level at the offering price by the underwriters who are short. It is a win-win. Once the overallotment short position is covered, the prevailing market conditions, if there is weakness, will be revealed. That is why the prospectus says this: "These activities may have the effect of stabilizing or maintaining the market price of the common stock at a level above that which might otherwise prevail in the open market." The underwriters are working with OCAT, not against them. I'll ask again - are you saying that Jefferies is likely shorting OCAT on the open market right now? Thanks for this. Certainly makes sense. Had to read it twice though! |
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Post by Keybridge - Cult Member 003 on Dec 11, 2014 1:44:39 GMT
This is a form of manipulation, but to the benefit of the shareholders and investors.
Although it provides price stability to resist any potential downward pressures, it's also very much a spring that can cause the price to move higher too quickly, thereby resulting in more volatility for at least a few days.
I also believe since the shorting is coming in at the upper range of $6 (closer to $7) that the offering will be above $7, while $8 is a real possibility.
Good idea to buy at these levels.
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Post by HeyNow on Dec 11, 2014 1:54:44 GMT
Tradeup and Jck - what are you two suggesting? Are you suggesting the underwriters are shorting the stock in the open market today and this week? Not a rhetorical question, I'm genuinely curious if that's really what you mean to say. I would implore you to re-read this sentence in that description: "These activities may have the effect of stabilizing or maintaining the market price of the common stock at a level above that which might otherwise prevail in the open market" and this one: "The underwriters have advised us that, pursuant to Regulation M under the Securities Exchange Act of 1934, as amended, certain persons participating in the offering may engage in short sale transactions, stabilizing transactions, syndicate covering transactions or the imposition of penalty bids in connection with this offering" It says the activities are meant to stabilize the pps or keep it at a level above that which might otherwise prevail, not hinder it or make the underwriters money through some riskless transaction. That's because the mechanics of an offering with an overallotment option go like this: Jefferies et al. go out and sell 11.5 million shares (1.5 million more then the offering). This way, they have oversold the offering shares made available and are now "short" 1.5 million shares. There are two scenarios in which they will cover their short, after the offering closes: 1. The share price stays the same or goes up after the offering - Jefferies et al are permitted under the terms of the overallotment option to cover at the offering price, hence closing their short position at the short sale price. The greenshoe option ensures their short position has no risk of losing money 2. The share price declines after the offering. Jefferies et al. would now be able to cover their short position by buying in the open market at prices lower then their short position (offering price). They would make money on their short while simultaneously supporting the pps in the market following the offering. For the underwriters, there is no risk in their short position and they may even profit if the stock trades down after the offering. and in both scenarios they make extra commission on the overaloltment shares. For OCAT, they are provided some support level at the offering price by the underwriters who are short. It is a win-win. Once the overallotment short position is covered, the prevailing market conditions, if there is weakness, will be revealed. That is why the prospectus says this: "These activities may have the effect of stabilizing or maintaining the market price of the common stock at a level above that which might otherwise prevail in the open market." The underwriters are working with OCAT, not against them. I'll ask again - are you saying that Jefferies is likely shorting OCAT on the open market right now? Lol. Yes, of course they are shorting. Jefferies is currently a Market Maker. They are heavily involved in the daily shorting. You are in over your head, HeyNow! Oh I'm well aware I'm over my head conversing with a genius like you But before I give you a round of applause, care to explain why, as you suggest Jefferies is going short in the open market as part of a market making capacity and covering with the overallotment option is not a violation securities laws, specifically Rules 101, 103, or 105 of Regulation M from the SEC Division of Trading and Markets? I just want to learn from the master, help me out here. |
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Post by HeyNow on Dec 11, 2014 1:57:54 GMT
I read it slightly different than either the Hatfields or McCoys.. The underwriters have advised us that, pursuant to Regulation M under the Securities Exchange Act of 1934, as amended, certain persons participating in the offering may engage in short sale transactions, stabilizing transactions, syndicate covering transactions or the imposition of penalty bids in connection with this offering. These activities may have the effect of stabilizing or maintaining the market price of the common stock at a level above that which might otherwise prevail in the open market.To me, above they are saying that the underwriters advised OCATA that certain persons, which I take to mean people potentially buying into the offering (but could also mean underwriters), may engage in other transactions. Those transactions include short sales AND/OR stabilizing transactions. And if you were buying into the offering and you felt confident you were going to be able to buy it at a price lower than it is trading, why would you not short it? if you are right there is almost no risk in the transaction. For people who are not familiar, when you short a stock you are basically borrowing to sell. So why would they not borrow 1000 shares to sell at $7 (or $6.50 or whatever) if you are confident (because you are an institutional investors and know more about these transactions than any of us on this board) that the price will be lower in the offering and you are buying those 1000 shares anyway? I mean isn't it basically just a covered call except you are far more certain of the outcome? Correct me if I am wrong. I said this last week, but the people on wall street are not rich by accident just like Casino's in Vegas aren't luxurious because you can beat their table games. They are going to get a good deal. JMHO Any "persons" doing this would also be in violation of Regulation M I believe www.sec.gov/News/PressRelease/Detail/PressRelease/1370539804376#.VIj58DHF-a4www.linkedin.com/pulse/20140923125821-132518611-sec-filed-actions-against-19-firms-and-one-individual-trader-for-violation-of-rule-105-of-regulation-metc. |
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Post by actcfan on Dec 11, 2014 2:06:47 GMT
I read it slightly different than either the Hatfields or McCoys.. The underwriters have advised us that, pursuant to Regulation M under the Securities Exchange Act of 1934, as amended, certain persons participating in the offering may engage in short sale transactions, stabilizing transactions, syndicate covering transactions or the imposition of penalty bids in connection with this offering. These activities may have the effect of stabilizing or maintaining the market price of the common stock at a level above that which might otherwise prevail in the open market.To me, above they are saying that the underwriters advised OCATA that certain persons, which I take to mean people potentially buying into the offering (but could also mean underwriters), may engage in other transactions. Those transactions include short sales AND/OR stabilizing transactions. And if you were buying into the offering and you felt confident you were going to be able to buy it at a price lower than it is trading, why would you not short it? if you are right there is almost no risk in the transaction. For people who are not familiar, when you short a stock you are basically borrowing to sell. So why would they not borrow 1000 shares to sell at $7 (or $6.50 or whatever) if you are confident (because you are an institutional investors and know more about these transactions than any of us on this board) that the price will be lower in the offering and you are buying those 1000 shares anyway? I mean isn't it basically just a covered call except you are far more certain of the outcome? Correct me if I am wrong. I said this last week, but the people on wall street are not rich by accident just like Casino's in Vegas aren't luxurious because you can beat their table games. They are going to get a good deal. JMHO Any "persons" doing this would also be in violation of Regulation M I believe www.sec.gov/News/PressRelease/Detail/PressRelease/1370539804376#.VIj58DHF-a4www.linkedin.com/pulse/20140923125821-132518611-sec-filed-actions-against-19-firms-and-one-individual-trader-for-violation-of-rule-105-of-regulation-metc. I don't know, these two statements don't seem to line up.. The SEC’s Rule 105 of Regulation M prohibits the short sale of an equity security during a restricted period – generally five business days before a public offering – and the purchase of that same security through the offering. certain persons participating in the offering may engage in short sale transactions
Looks like some exceptions to the rule: www.sec.gov/about/offices/ocie/risk-alert-091713-rule105-regm.pdfRule 105 provides three exceptions: the “bona fide purchase” provision; an exception for
separate accounts; and an exception for investment companies.
5
First, the “bona fide purchase”
exception generally provides that persons can purchase securities in the offering even if they sell
short during the Rule 105 restricted period as long as they make a bona fide purchase equivalent
in quantity to the amount of the restricted period short sale(s) prior to pricing. Eligibility for the
bona fide purchase exception depends on compliance with specific timing and trade reporting
requirements that are intended to allow the market to see and take into account purchasing
activity in the stock prior to the pricing of the offering.
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Post by HeyNow on Dec 11, 2014 2:23:01 GMT
I don't know, these two statements don't seem to line up.. The SEC’s Rule 105 of Regulation M prohibits the short sale of an equity security during a restricted period – generally five business days before a public offering – and the purchase of that same security through the offering. certain persons participating in the offering may engage in short sale transactions
Looks like some exceptions to the rule: www.sec.gov/about/offices/ocie/risk-alert-091713-rule105-regm.pdfRule 105 provides three exceptions: the “bona fide purchase” provision; an exception for
separate accounts; and an exception for investment companies.
5
First, the “bona fide purchase”
exception generally provides that persons can purchase securities in the offering even if they sell
short during the Rule 105 restricted period as long as they make a bona fide purchase equivalent
in quantity to the amount of the restricted period short sale(s) prior to pricing. Eligibility for the
bona fide purchase exception depends on compliance with specific timing and trade reporting
requirements that are intended to allow the market to see and take into account purchasing
activity in the stock prior to the pricing of the offering.
From what ive learned, the exemptions for investment companies are for cases when separate firewalled funds within the same firm are operating independantly. Not to just allow investment firms some risk free arbitrage. The entire regulation is ntended to prevent these risk free profit opportunities that would artificially manipulate the price down when one knew they could cover thru offering. Theres a bit about a bona fide purchase (the short sell must have been done without intent to cover hru the offering is one criteria) and investment firm exemption at bottom of this: www.mondaq.com/unitedstates/x/300284/listing+rules+flotation/A+Guide+to+Regulation+M+Regulating+Market+Activity+During+a+Public+Offering |
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Post by tradeup on Dec 11, 2014 2:28:05 GMT
Thanks for posting this, AF. On my phone at a Bull's game and my battery is running low.
Just because Jefferies is shorting the stock doesn't mean they are "betting against" OCAT.
P.S. Did Keybridge really just suggest the pricing may be at $8? Somebody please tell him this isn't an IPO.
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Post by HeyNow on Dec 11, 2014 2:35:02 GMT
I don't know, these two statements don't seem to line up.. The SEC’s Rule 105 of Regulation M prohibits the short sale of an equity security during a restricted period – generally five business days before a public offering – and the purchase of that same security through the offering. certain persons participating in the offering may engage in short sale transactions
Looks like some exceptions to the rule: www.sec.gov/about/offices/ocie/risk-alert-091713-rule105-regm.pdfRule 105 provides three exceptions: the “bona fide purchase” provision; an exception for
separate accounts; and an exception for investment companies.
5
First, the “bona fide purchase”
exception generally provides that persons can purchase securities in the offering even if they sell
short during the Rule 105 restricted period as long as they make a bona fide purchase equivalent
in quantity to the amount of the restricted period short sale(s) prior to pricing. Eligibility for the
bona fide purchase exception depends on compliance with specific timing and trade reporting
requirements that are intended to allow the market to see and take into account purchasing
activity in the stock prior to the pricing of the offering.
The "persons participating in the offering" that are "engaging in short sale" transactions are the underwriters going short as part of the offering. They (the underwriters) that do so will need to cover in the open market (supporting the pps) or exercise with ocata, if the pps goes up after offering (in this case ocata would get the proceeds from the exercise). The option is meant to stabilize the pps after the offering, not give some riskless opportunity to jefferies to short the stock as low as they can, then cover at the offering price... that would seem to be illegal. |
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Post by Keybridge - Cult Member 003 on Dec 11, 2014 2:42:40 GMT
Thanks for posting this, AF. On my phone at a Bull's game and my battery is running low. Just because Jefferies is shorting the stock doesn't mean they are "betting against" OCAT. P.S. Did Keybridge really just suggest the pricing may be at $8? Somebody please tell him this isn't an IPO. I'm still waiting for news of the discount and warrants you've been predicting - for what, like three years? And if PJ is shorting at near $7 - is an $8 price that unfeasible? Someone needs to tell you that this offering is in connection with a listing - it's not already a listed stock, which you don't seem to understand. Trade, one day I'll teach you how to apply logic. |
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Post by HeyNow on Dec 11, 2014 2:43:47 GMT
Anyone reading up on regulation m, try to do so objectively and ask what the intention of the law is. Im hard pressed to believe anyone doing so can interpret it has giving impunity to jefferies to profit off shorting ocat during the pricing period and covering with the overallotment option. That you, tradeup, say this then laugh at me being "in over my head" is a frigging embaressment and sick joke
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