The Great Myth of Shorts

As I peruse the messageboards on the Internet, I can't help but to notice all the chatter about the number of shorts on small cap stocks (OTCBB and Pink Sheets). The chatter seems to increase at the time when a stock price is going down. Although there are people that are involved in the shorting of 1 and 2 cent stocks on the OTCBB and Pink Sheets, I don't believe that most real players in the short game are shorting 1 and 2 cent stocks. Of course, there are rare instances that a stock may have substantial liquidity to establish a short position. With that said, should we really worry about an individual or an institution shorting $15,000 worth of a public company's stock.

Take an example of a company that has 16,000,000 shares outstanding and a stock trading at 10 cents. Let's face it, shorting that stock with a substantial position is potential financial suicide. Good news and the stock is at 80 cents and then try to cover. You're dead !!!!!!!

I always tell our clients the same thing. The short in a small cap stock is usually either an impatient shareholder or the short could be a potential or existing financier. However, no major wirehouse would endorse any of their traders going short $100,000 of stock in a company that trades at a market cap of $2,000,000. The point is to stop worrying about the shorts. In most cases, the shorts on small cap stocks are usually ghosts. Spend your effort on building the company and if you are a sharholder, just open your eyes.