✌️ Goodbye naked shorts
😯 AMC stock is the next security to be exposed!
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Gooood morning, Rainmakers!
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This week I have one captivating topic for you:
1️⃣ Goodbye naked shorts: Did you know the short interest on a stock could be higher than the number of shares outstanding? Issuing a dividend can expose this illegal activity and blockchain will fully eradicate it!
Without further ado, it's time to…
Get liquid 💧
✌️ Goodbye naked shorts
What if I told you the end is near for short-sellers... naked short-sellers to be more specific!
Recently, Marc Cohodes may have uncovered the key to eradicating naked short-sellers once and for all!
In his 30+ year investment career, Marc has been going after the bad guys of Wall Street and supposedly has exposed 50-70 frauds, with some of them even seeing jail time.
Through these efforts, some call him “the scourge of Wall Street,” and “Warren Buffett’s mosquito.”
For those of you who don't know, Marc rose to prominence from being a successful short-seller, so the fact he wants to take down naked short-sellers says a lot.
He might be the most interesting man in Wall Street.
In fact, let's take a trip down memory lane.
Not too long ago, Marc and many other investors held short positions on Overstock.com ($OSTK).
The acting CEO of Overstock at the time was Patrick Byrne and he was not too pleased with a large amount of short interest on the stock.
To combat the short interest, Patrick issued a security token dividend that would trade on tZERO, a digital security alternative-trading system and subsidiary of Overstock at the time, which would force short-sellers to cover their positions.
The main reason it forced short-sellers to cover their positions is that whenever an issuer issues a dividend, the number of outstanding shares are required to be counted; therefore, exposing the number of naked-short positions and forcing the positions to be covered.
Let's get basic:
Naked shorting is the illegal practice of short-selling shares that do not exist.
For example, if there were 100 shares outstanding of a specific security, but 200 were shorted, how do you issue more dividends than the number of shares outstanding?
You simply can't do that.
Marc saw the brilliance of this strategy and immediately switched from shorting $OSTK to going long.
That's where the ideas began churning for Marc Cohodes.
Marc went on live TV and expressed his frustration that many retail investors lost their life savings earlier this year in stocks like $AMC or $GME, due to brokers like Robinhood restricting users from buying and selling certain securities.
He sternly believes this was an illegal act.
He has been in talks with Adam Aron, the CEO of AMC, to discuss doing a similar strategy as Overstock to eradicate the naked-short selling.
Aron has told Cohodes to stop contacting him, but I personally think he is on to something huge!
For all of the naked short interest in 'existence', issuing a dividend would force all of the naked shorts to close their positions, causing the price of the stock to rise.
On an even better note, once blockchain is fully integrated into our financial systems infrastructure, cap tables and shareholders will be public for everyone to see, which will make it impossible to short more shares than the float.
Whether companies decide to follow this strategy or not, it's only a matter of time until naked-short selling is a thing of the past!
Blockchain not only solves this issue, but many more 😎
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✍️ 📹 Content from the team
Thanks for tuning in! Keep an eye out each Monday for the next security token adventure 🧗♀️
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