Star Scientific: Short Base Low, Utilization High

The tobacco-control movement celebrated another milestone yesterday as the U.S. Senate easily passed a bill giving the government unprecedented power over the making and marketing of tobacco products.

Star Scientific Inc. (STSI) is an interesting stock within the Tobacco sector, as they specialize in tobacco cured technology. The short base (as measured by Percent Shares Outstanding on Loan) in STSI is 7.76% and the utilization (which measures the supply and demand in the securities lending market) is 94.13%.

In 2007 CEO and major shareholder (holding over 18%), Jonnie Williams moved the company out of its traditional core businesses of cigarettes into this new curing technology, which prevents the formation of carcinogenic toxins present in tobacco and tobacco smoke.

The ownership structure of STSI would explain the why the short base is so low and the utilization is so high. Utilization is a key indicator in understanding the crowdedness of a short position.

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