RE: Hey boys ...Bobo, check your calendar. The TSX suspended trading in SMY April 7 and that was after a morning (pre-market) halt and resumption on April 6 around pending news (SAMSys announced its consent to the appt. of receiver to dispose of assets).
There were less than 70K shares short on March 31; 3 days AFTER Wellington issued its notice of default. And this was only a small increase from the almost 52K shares short in mid-March. The short statistics – at least those reported and published (but more on this below) – don’t support an insider knowledge allegation.
However, you’re right shares short did increase in April. The last report I have from NatPost shows 264,170 shares short on April 13, up about 200K from 68,900 at the end of March, not insignificant, but perhaps “nuts” is putting it a bit strongly considering total shares o/s were over 51M. This short position would represent the residual outstanding after trading was suspended on April 7 and the net new (about 200K) short sales would have occurred during the last week of trading (i.e. the 1st week of April).
Curiously though, NatPost reports 364,170 or another jump of 100K shares short by April 28. Since the stock had already ceased trading, the increase must have come from either late reporting or a correction to an error made on the April 13th count. This may be one outcome so far of the RS investigation.
All this said, you have to wonder what accounts for the huge increase in trading volume (that’s what went nuts) and you can’t help but wonder somebody made a lot of money from the sell off. Either that or insiders just dumped what they could to take a tax loss. Thing is, SEDI reports no insider activity since January when Tom received his 400K 0.45/share options (which he never exercised). Even BTG and OTPP didn’t sell any and they bought at much higher prices. For them it was probably immaterial given they couldn’t recoup much anyway, so might as well just take a marginally bigger tax loss when they get disposition of their shares.
It’s my suspicion that Wellington was behind naked shorting of the stock, possibly beginning somewhere in early February, when Samsys peaked over .80/share. They probably “accumulated” a large short position a little at a time, day by day until they pulled the plug at the end of March. As Canada doesn’t have a Regulation SHO like the US, naked shorting isn’t reported keeping the market unaware of what’s going on, something the hedge funds love to capitalize on. Even O’Leary on ROBtv (Squeeze Play) occasionally coyly alludes to his own naked shorting! Hey, it ain’t a crime if you don’t get caught. Amanda scolds him of course…
This is the only explanation that makes sense to me to account for the rapid demise of SAMSys. I’m not saying Wellington had it in for SAMSys from the beginning, although they had covenants set up to make sure they couldn't lose, as all secured lenders do. Rather when Tom came along wanting to morph the company from a technology developer into a “business solutions” service, Wellington didn’t buy it. Some SAMSys directors didn’t either.
Fast forward to the last 2 days of trading when over 13M shares changed hands. Who’s buying all those shares when the market knows the fat lady has already sung (SAMSys consented to receivership the morning of April 6)? I suspect a lot of it was Wellington covering their shorts. Do you have to cover a naked short? No, but it closes a short position. The short is naked only because the shorted stock wasn’t borrowed within 3 business days. Buying to cover closes those trades on the broker’s books. I would say it was an attempt by Wellington to sweep their naked shorts under the carpet. Of course they had to buy some “real” (beneficially owned) stock as well, from last-minute sellers like myself who finally capitulated, but I’m sure it was a small price to pay given what they made on their short sales. On net, they likely gained big time. I wouldn’t be surprised enough to give golden handshakes and/or hush money to Tom and other SAMSys directors as well.
Question now is who’s holding those 364K outstanding short shares? And will the next short report reveal more?