Of all the stocks often mentioned here, only one has experienced a sudden and drastic reduction in margin value strictly because of margin rules. That stock is Xebec .
Ballard, Plug, and FuelCell all still have the same margin value as they have throughout their declines, they are all optionable, and all still have 70% margin value. Greenlane was never marginable, as far as I know.
When Xebec first traded through $5 to the downside, Its margin value dropped from 50% to 25% ( in some cases 30%).
In fact, theoretically, anyone who was fully margined, and who owned 20,000 shares of Xebec, immediately went from being onside to being $25,000 under margin the moment the stock went from $5.01 to $4.99. It is very likely that there are people who averaged down in Xebec prematurely by buying stock on margin. This would have caused problems for them. The same can be said for those who may have averaged up on margin.
In my experience, most of the big firms are pretty slack on calling margins particularly when a stock's margin requirements change because of the "rules". Ie from $5.01 to $4.99. From 50% margin value to 25%.
Brokers can hold off selling out a client for weeks, often under the guise of "doing the client a favor" and "siding with them", when in fact the firm's own capital is at less risk.
Four weeks is about as long as an individual broker can keep head office at bay, if that's what the clients want. How aggressive do you think TD was selling out clients when Xebec first traded below $5, and when their own target on Xebec is $7.50?
Nevertheless, the pressure to cover margin increases the lower the stock goes, and the less likely it is to regain higher-margin status in the near term.
The big firms usually give the client "till the end of the week to "cover or sell", before they sell-out the client's offending shares.
They usually say "by one o'clock" Friday, but they don't actually sell out the client till late in the day. If they sell the client out earlier, and the client shows up with a check in the afternoon, after being sold out, it's a dog's breakfast.
I'm of the opinion that margin issues have been a contributing factor to Xebec's recent weakness. It's even quite likely that this explains Xebec's peculiar weakness on Friday, if not throughout recent sessions.
I mentioned last Thursday that the trading was unusual. After having had 2 1/2 hours to digest the earnings, the market opened down 11 cents at $3.79, sold off another 16 cents to $3.63, and then rallied a full 12.5% to $4.08 only to close lower and near the day's low. At first, when the stock had rallied to positive territory, I thought I was right in having declared " The market will like these numbers! ". The stock was up 4.6% on the day. Then the stock turned down again.
I think the moment the rally faltered, margin selling materialized. As well, I think we saw additional margin-related selling on Friday as deadlines for meeting margin calls approached.
If I'm right, which is a big "if" these days, Xebec won't be under the same pressures tomorrow as it was on Friday. The stock may open lower, but I think it will be a good day. This company's future revenues and earnings have been discounted beyond reason here, but the stock has been buffeted by emotional shareholders, as well as by shareholders who have been forced to sell under duress.
There may be some residual selling in the morning, maybe, but I expect it will be short-lived.