RE:RE:RE:Why is it Possible to Short 140% of a Company's Shares?Market makers can also naked short and typically that is what they like to do especially at the opening because it does not use the capital of the firm and the capital each market maker is individually allocated. You often see this with US stocks that have many market makers. At the opening especially in illiquid stocks, this can increase volatility and trigger a downward spiral,
For D-BOX considering a real takeover possibility (because of carry-forward tax losses which can be used by a Canadian buyer), it would be suicidal to short at these levels. And this assumes that is you can borrow the stock at a reasonable price, which I doubt.
Typically, you want to short a stock where you can purchase a call option or hold a warrant to manage the risk. If you are not making a market with the possibility to cover and trade intraday shorting can be very risky if not properly executed and at the right cost.
It continuously amuses me to see the many posts are about a BIG SHORT conspiracy in stock A or B. They are typically posted by people that have no clue or experience on how these trades are typically carried out in the real world. They just like the buzz word and see it everywhere.
The world is not all about conspiracy. Some compagnies are just very risky and maybe with DBO a majority of investors recognize it. I think to contribute positively to a site such as Stockhouse, we should remind ourselves once in a while of the buyer beware rule and the do not fall in love with a stock rule.
This does not mean that DBO will not increase in value. Theoretically, D-BOX may see better days ahead. Unfortunately, it probably makes no money selling a few theater seats at a time and then having to install them at the other end of the world and service them. To undergo any sort of expansion or even negotiate a good deal as an example with a gaming console manufacturer (listen to the recent VP marketing interview on French radio) or seat manufacturer, they will need CASH. What can you negotiate with only a few million $ in the bank, debt due within a few years, and no institutional or sell-side support for your stock ?
I admit that recently they seem to be making good moves although many details are not disclosed in press releases or MD&A which i do not like. If they can negotiate good agreements, eventually get out of manufacturing that uses up too much capital in infrastructure, headcount and working capital they may turn out to be a hell of a turnaround within a few years. Unfortunately, I have not yet seen anything out of this management team or Board that make me believe this is possible or will happen.
At the end of the day, I believe they will need to take a hair cut and give up something to strengthen their balance sheet. Get some flexibility to then move forward faster and stronger.
So far, their performance with investors has been lack luster and unless a miracle, they will not be able to raise the price enough to avoid massive dilution. IMO, Their best bet is to sell the company. Remember, if you need to sell more that 50% of the company to raise a level of cash that makes sense to execute your business plan it means you give up control and are actually selling the whole company.
This takeover scenario may be a dream for the few that bought at few pennies or a CEO that got 1 million options at 8 cents. However, the bottom line is that the vast majority of longer-term investors will only be left with losses to carry forward.
This being said, GLTA, I want to believe in this story, but I want to see the next chapter on how they will derisk and execute. I also wish to see more tranparency and less restatements in their disclosure.