Naked Short Selling Is Killing OTC Companies

May 23, 2012 11:15 AM ET1 Comment
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Contributor Since 2012

We specialize in tracking OTC Short Selling. We write articles and updates on OTCQB, OTCQX and PINKSHEETS short positions. We provide unbiased reporting based off factual data statistics that are delivered by FINRA under REGSHO.

Shorts are alive and well and, the OTC Markets haven't seen the kind of rampant short pressure that is more and more commonplace today. Small development stage companies, and even profitable companies are being negatively attacked and sucked into a trap of naked short selling, which ultimately sends their stock prices plummeting, and often to the point of no return.

According to a leading data provider of Naked Short Position information, a higher than normal number of companies are contacting them with questions ranging from who is shorting my stock to why are their securities being shorted so heavily. As a data provider, doesn't know who's behind the shorting, but suspicions are it's Market Makers who are operating on a completely different playing field, are taking advantage of the rules.

Market Makers, unlike Brokers, can simply create shares out of thin-air that quite frankly cease to exist under the guise of creating liquidity and keeping markets rolling. The problem is when a Market Maker decides to send your stock in a downward direction, that's it, your company is going down. It doesn't matter whether you try to short squeeze the heck out of them or not, in the end, they always win.

Recently, ISM International (PINKSHEETS ISML), a victim of short selling, was so fed up with the abusive practices taking place with their stock, they contacted regarding the possibility of creating a documentary to expose what is really happening. Only yesterday 73% of ISML was shorted for no apparent reason. Orders come into the stock, and Market Makers simply short against them, and then show up on the bid at much lower prices-waiting like predators. "I spend a great deal of the day explaining to my shareholders that we are being attacked. I have complained to the appropriate authorities, but no one seems to care," says Mario Quenneville, CEO of ISM International.

Naked Short Selling is also a common practice on penny stock promotions. Look at companies like SNPK, POTG, and current promotion GWBU. The short positions in these stocks are huge. Market Makers are building massive short positions in the dollar range, and effectively staying naked-short until these promotions get crushed, and give them the opportunity to cover in the sub-penny range. Of course, these Market Makers face no borrowing fees or lending contracts like regular Brokers, so essentially it's just the wild, wild-west where they know full well they can do whatever they please. executives say it's not uncommon to see 50% of a stock promotion being shorted. The big traders have lots of money… a lot more than the retail audience, and there is no urgency to cover these positions. Market Makers can't be scared into covering because quite honestly they don't care. A stock can run up 500% and they have proven they will just short more.

We invite investors to take a look at what is happening with this illicit naked short selling practice at

Feel free to query any OTC Stock you wish, and you'll be surprised at the amount of information you will find.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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