RE:HARD TO BELIEVE PEOPLE ARE STUPID ENOUGH TO Doesn't the market maker hold a large number of shares. Does he sell his shares to take care of the bids? I am not sure how that works.
On the other hand you have people who probably have very large positions, and they know a lot more than me. Thye could be taking profits and particiapting in private placements on cheap paper or in stocks that have good upward potential.