Letter to CDN Finance MinisterThis is a letter going around to Mr. Flaherty. The cessation of shorting would do a lot to bring stability back into our markets.
Consider sending a similar letter:
Minister Jim Flaherty ( jflaherty@fin.gc.ca )
Department of Finance
Government of Canada
Dear Mr. Flaherty,
I wish to propose a three year moratorium on the shorting of Canadian resource stocks as a way of helping this vital Canadian industry regain its strength and momentum.
Background:
In August 2007 the subprime crisis in the US caused havoc on our stock markets and in particular the TSX Venture where a great many resource company stocks are traded. Since that time, many resource stocks have been heavily shorted the result of which has been utter devastation in the Canadian resource sector. Many of these stocks have been so hit by shorting of hedge funds and players close to the market that many if not most on the venture are down 90% which is cause for great concern.
Problem:
Resource stocks which have bona fide deposits and need to raise money to advance their exploration and development programs will not be able to do so because share prices are so depressed that they cannot raise the equity funds necessary without seriously diluting their capital share structure.
Problem:
Companies with completed feasibility studies and a go ahead for mine production cannot raise funds via debt financing because the credit markets have dried up therefore sending them back to the equity markets which is unworkable for most currently due to depressed prices.
Proposed Solution:
I propose a 3 year moratorium on any shorting of Canadian resource stocks which would provide the following:
a)Bring stability into the markets which have been crushed due to market players.
b)Stability will draw investors back into the equity markets and provide a source of funds for companies who badly need financial injections to advance their operations.
c)A period of stability looking ahead will send a positive message to global investors from that stability exists within the Canadian markets and it’s a safe place to invest. This would be a big plus for Canadian companies, investors and our markets.
I realize this is an oversimplification for reasons of brevity.
There are many viable companies who are barely treading water and may have to be mothballed unless help is forthcoming. They have good projects and need to see some stability and encouragement in the sector which will allow for normal value equity financings rather than see excessive dilution at fire sale prices which is not good for anyone. Best of all, it would cost nothing to the taxpayer.
Your consideration of this proposal would be greatly appreciated.
Kindest regards,
Name