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Post by yossarian on Oct 13, 2015 15:58:30 GMT -5
is now 28% - nice way to, in effect, lower your basis in MNKD.
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Post by prmco26 on Oct 14, 2015 14:33:59 GMT -5
While it has been reported that Chas. Schwab and others’ are offering premiums of 25-30% to their clients who choose to lend their MNKD stock to borrowers (short sellers), lenders, especially individuals, should understand that this is just not free money coming in without risk, and the premium demonstrates that quite well. Yes, in a normal stock loan transaction and short sale there generally is little risk to the lender and a very small fee involved, especially in a zero interest environment but then again, the abnormally high premium received and an even higher amount paid by the borrower (including a mark-up for the prime broker), suggests that this is not business as usual. In this transaction, the prime brokers are acting as agent in the transaction, not principals.
According to NASDAQ reports, there are more than 120 million shares of MNKD that have been sold short, some 30% of the 400 million shares outstanding. Other SEC filings indicate that Al Mann in various entities, holds close to 150 million shares, something close to 40% of shares outstanding. Other filings put holdings of large funds and institutions at 100 million shares, or some 35% of outstanding shares.
Assuming an actual float best guess around 120 million shares, the short position and float appear closely similarly sized.
Some months ago, shares of MNKD routinely traded about 10 million shares a day, but daily trading in recent weeks has diminished to an average around 3 – 4 million shares, putting the days-to-cover around 40 days – assuming short sellers could buy every single share traded every day for 40 days – without driving the stock price higher. Many people have posted on message boards about the possibility of the coming of a short squeeze and it may or may not be correct, but the potential is there. Certainly there can be no question that there is something very unusual going on in MNKD, as the stock sets daily lows under a limited news flow, diminished trading volume, stock lending rates at abnormal high levels and posting on web based investment sites negative and plentiful and the messages urging investors to sell short, even at these levels approximating $3.00 per share.
I am an SEC registered person in the investment business (Disclosure-over 50 years) and one maxim I learned early was “never risk a lot to make a little .” (Full Disclosure – I am long MNKD.) Recently, our Prime Broker/Clearance Firm sent the following message: “SEC Rule 204(d) requires…(us)… to provide broker dealers for which it clears trades or from which it receives trades for settlement, with a clear notice that an allocation of legal responsibility is being made pursuant to Rule 204(d). When…(we)..allocate(s) a fail to deliver position to another registered broker dealer, all obligations under Rule 204(a) and 204(b) rests solely with the allocated broker-dealer and not with…(us).”
There is no easy money. When an opportunity looks too good, a no-brainer, it probably is. It strikes me that when/if this short squeeze comes down, there could be margin calls, fails, buy-ins, etc. and significant losses could occur leading to litigation and possibly even SIPC liquidations for some firms, and large legal bills. I have elected not to participate in stock loan activities and am forsaking lending opportunities. I suggest that all retail investors clarify their potential investment risk and legal exposure should any mishap or adverse situation develop.
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Post by centralcoastinvestor on Oct 14, 2015 14:56:21 GMT -5
While it has been reported that Chas. Schwab and others’ are offering premiums of 25-30% to their clients who choose to lend their MNKD stock to borrowers (short sellers), lenders, especially individuals, should understand that this is just not free money coming in without risk, and the premium demonstrates that quite well. Yes, in a normal stock loan transaction and short sale there generally is little risk to the lender and a very small fee involved, especially in a zero interest environment but then again, the abnormally high premium received and an even higher amount paid by the borrower (including a mark-up for the prime broker), suggests that this is not business as usual. In this transaction, the prime brokers are acting as agent in the transaction, not principals. According to NASDAQ reports, there are more than 120 million shares of MNKD that have been sold short, some 30% of the 400 million shares outstanding. Other SEC filings indicate that Al Mann in various entities, holds close to 150 million shares, something close to 40% of shares outstanding. Other filings put holdings of large funds and institutions at 100 million shares, or some 35% of outstanding shares. Assuming an actual float best guess around 120 million shares, the short position and float appear closely similarly sized. Some months ago, shares of MNKD routinely traded about 10 million shares a day, but daily trading in recent weeks has diminished to an average around 3 – 4 million shares, putting the days-to-cover around 40 days – assuming short sellers could buy every single share traded every day for 40 days – without driving the stock price higher. Many people have posted on message boards about the possibility of the coming of a short squeeze and it may or may not be correct, but the potential is there. Certainly there can be no question that there is something very unusual going on in MNKD, as the stock sets daily lows under a limited news flow, diminished trading volume, stock lending rates at abnormal high levels and posting on web based investment sites negative and plentiful and the messages urging investors to sell short, even at these levels approximating $3.00 per share. I am an SEC registered person in the investment business (Disclosure-over 50 years) and one maxim I learned early was “never risk a lot to make a little .” (Full Disclosure – I am long MNKD.) Recently, our Prime Broker/Clearance Firm sent the following message: “SEC Rule 204(d) requires…(us)… to provide broker dealers for which it clears trades or from which it receives trades for settlement, with a clear notice that an allocation of legal responsibility is being made pursuant to Rule 204(d). When…(we)..allocate(s) a fail to deliver position to another registered broker dealer, all obligations under Rule 204(a) and 204(b) rests solely with the allocated broker-dealer and not with…(us).” There is no easy money. When an opportunity looks too good, a no-brainer, it probably is. It strikes me that when/if this short squeeze comes down, there could be margin calls, fails, buy-ins, etc. and significant losses could occur leading to litigation and possibly even SIPC liquidations for some firms, and large legal bills. I have elected not to participate in stock loan activities and am forsaking lending opportunities. I suggest that all retail investors clarify their potential investment risk and legal exposure should any mishap or adverse situation develop. Well stated. It would appear to me that something is coming to a head with short interest. There is no way that 120,000,000 short shares will all get out unscathed if the price suddenly goes up. Particularly with just 3 to 4 million shares being traded a day. |
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Post by james on Oct 14, 2015 15:46:33 GMT -5
The only risk that I can identify to the lender is that no shares are available to be returned in the event that trading is stopped (buyout) or the broker becomes insolvent. In these cases, the lender has been granted collateral in a separate account that is adjusted daily. It is possible that this collateral is thought insufficient in the event of a rapid price spike (buyout) where the borrower is simultaneously unable to make the lender whole, but otherwise stands to insure against such risk. Is there something I am missing in that?
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Post by centralcoastinvestor on Oct 14, 2015 15:56:48 GMT -5
While it has been reported that Chas. Schwab and others’ are offering premiums of 25-30% to their clients who choose to lend their MNKD stock to borrowers (short sellers), lenders, especially individuals, should understand that this is just not free money coming in without risk, and the premium demonstrates that quite well. Yes, in a normal stock loan transaction and short sale there generally is little risk to the lender and a very small fee involved, especially in a zero interest environment but then again, the abnormally high premium received and an even higher amount paid by the borrower (including a mark-up for the prime broker), suggests that this is not business as usual. In this transaction, the prime brokers are acting as agent in the transaction, not principals. According to NASDAQ reports, there are more than 120 million shares of MNKD that have been sold short, some 30% of the 400 million shares outstanding. Other SEC filings indicate that Al Mann in various entities, holds close to 150 million shares, something close to 40% of shares outstanding. Other filings put holdings of large funds and institutions at 100 million shares, or some 35% of outstanding shares. Assuming an actual float best guess around 120 million shares, the short position and float appear closely similarly sized. Some months ago, shares of MNKD routinely traded about 10 million shares a day, but daily trading in recent weeks has diminished to an average around 3 – 4 million shares, putting the days-to-cover around 40 days – assuming short sellers could buy every single share traded every day for 40 days – without driving the stock price higher. Many people have posted on message boards about the possibility of the coming of a short squeeze and it may or may not be correct, but the potential is there. Certainly there can be no question that there is something very unusual going on in MNKD, as the stock sets daily lows under a limited news flow, diminished trading volume, stock lending rates at abnormal high levels and posting on web based investment sites negative and plentiful and the messages urging investors to sell short, even at these levels approximating $3.00 per share. I am an SEC registered person in the investment business (Disclosure-over 50 years) and one maxim I learned early was “never risk a lot to make a little .” (Full Disclosure – I am long MNKD.) Recently, our Prime Broker/Clearance Firm sent the following message: “SEC Rule 204(d) requires…(us)… to provide broker dealers for which it clears trades or from which it receives trades for settlement, with a clear notice that an allocation of legal responsibility is being made pursuant to Rule 204(d). When…(we)..allocate(s) a fail to deliver position to another registered broker dealer, all obligations under Rule 204(a) and 204(b) rests solely with the allocated broker-dealer and not with…(us).” There is no easy money. When an opportunity looks too good, a no-brainer, it probably is. It strikes me that when/if this short squeeze comes down, there could be margin calls, fails, buy-ins, etc. and significant losses could occur leading to litigation and possibly even SIPC liquidations for some firms, and large legal bills. I have elected not to participate in stock loan activities and am forsaking lending opportunities. I suggest that all retail investors clarify their potential investment risk and legal exposure should any mishap or adverse situation develop. Can I make a suggestion. I would post this again as its own thread with a its own title. Your post provides very good info that might get buried in this thread. |
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Post by uvula on Oct 14, 2015 16:35:47 GMT -5
prmco26, you gave a long answer hinting that there is a risk to the lender, but you never actually came out and said that there was a risk and did not state what that risk might be. I did not lend my shares because I am afraid that there might indeed be a risk to me but the only thing I could come up with was that if Schwab (or whatever broker you use) went belly up you would be out of luck. Is there another risk, or are you just spreading fear to prevent people from lending their shares to the shorts?
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Deleted
Deleted Member
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Post by Deleted on Oct 14, 2015 17:00:33 GMT -5
The only risk that I can identify to the lender is that no shares are available to be returned in the event that trading is stopped (buyout) or the broker becomes insolvent. In these cases, the lender has been granted collateral in a separate account that is adjusted daily. It is possible that this collateral is thought insufficient in the event of a rapid price spike (buyout) where the borrower is simultaneously unable to make the lender whole, but otherwise stands to insure against such risk. Is there something I am missing in that? trading wont be stopped on a buy out - it will be halted and buy out is not instant..a buy out date is published with the terms and approval pending. Trading resumes if the trading halt pending news is lifted and its business as usual.. wanted to clarify if you were assuming so.. |
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Post by james on Oct 14, 2015 18:23:26 GMT -5
The only risk that I can identify to the lender is that no shares are available to be returned in the event that trading is stopped (buyout) or the broker becomes insolvent. In these cases, the lender has been granted collateral in a separate account that is adjusted daily. It is possible that this collateral is thought insufficient in the event of a rapid price spike (buyout) where the borrower is simultaneously unable to make the lender whole, but otherwise stands to insure against such risk. Is there something I am missing in that? trading wont be stopped on a buy out - it will be halted and buy out is not instant..a buy out date is published with the terms and approval pending. Trading resumes if the trading halt pending news is lifted and its business as usual.. wanted to clarify if you were assuming so.. Thanks iam2, I believe you are correct; I'm just trying to come up with a scenario where it's not possible for the shares to be returned. I'm not sure I can really come up with one outside of the broker failure. |
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Post by dreamboatcruise on Oct 14, 2015 19:23:14 GMT -5
While it has been reported that Chas. Schwab and others’ are offering premiums of 25-30% to their clients who choose to lend their MNKD stock to borrowers (short sellers), lenders, especially individuals, should understand that this is just not free money coming in without risk, and the premium demonstrates that quite well. Yes, in a normal stock loan transaction and short sale there generally is little risk to the lender and a very small fee involved, especially in a zero interest environment but then again, the abnormally high premium received and an even higher amount paid by the borrower (including a mark-up for the prime broker), suggests that this is not business as usual. In this transaction, the prime brokers are acting as agent in the transaction, not principals. According to NASDAQ reports, there are more than 120 million shares of MNKD that have been sold short, some 30% of the 400 million shares outstanding. Other SEC filings indicate that Al Mann in various entities, holds close to 150 million shares, something close to 40% of shares outstanding. Other filings put holdings of large funds and institutions at 100 million shares, or some 35% of outstanding shares. Assuming an actual float best guess around 120 million shares, the short position and float appear closely similarly sized. Some months ago, shares of MNKD routinely traded about 10 million shares a day, but daily trading in recent weeks has diminished to an average around 3 – 4 million shares, putting the days-to-cover around 40 days – assuming short sellers could buy every single share traded every day for 40 days – without driving the stock price higher. Many people have posted on message boards about the possibility of the coming of a short squeeze and it may or may not be correct, but the potential is there. Certainly there can be no question that there is something very unusual going on in MNKD, as the stock sets daily lows under a limited news flow, diminished trading volume, stock lending rates at abnormal high levels and posting on web based investment sites negative and plentiful and the messages urging investors to sell short, even at these levels approximating $3.00 per share. I am an SEC registered person in the investment business (Disclosure-over 50 years) and one maxim I learned early was “never risk a lot to make a little .” (Full Disclosure – I am long MNKD.) Recently, our Prime Broker/Clearance Firm sent the following message: “SEC Rule 204(d) requires…(us)… to provide broker dealers for which it clears trades or from which it receives trades for settlement, with a clear notice that an allocation of legal responsibility is being made pursuant to Rule 204(d). When…(we)..allocate(s) a fail to deliver position to another registered broker dealer, all obligations under Rule 204(a) and 204(b) rests solely with the allocated broker-dealer and not with…(us).” There is no easy money. When an opportunity looks too good, a no-brainer, it probably is. It strikes me that when/if this short squeeze comes down, there could be margin calls, fails, buy-ins, etc. and significant losses could occur leading to litigation and possibly even SIPC liquidations for some firms, and large legal bills. I have elected not to participate in stock loan activities and am forsaking lending opportunities. I suggest that all retail investors clarify their potential investment risk and legal exposure should any mishap or adverse situation develop. The obligation to return the shares rests with the broker, such as Schwab in my case. The chance that a single event would trigger a spike in MNKD and the insolvency of Schwab or that they would occur simultaneously for coincidental reasons seems far fetch (and a long far at that). There is no easy money, but I don't think anyone considers owning MNKD to loan it out is "easy money". Fact of the matter is that even collecting 10% to 28% interest recently has been a losing proposition compared to having simply sold the shares and repurchasing much lower. However, if one has the conviction of wanting to own MNKD shares, the interest has been nice padding to cushion the blow from falling share price. There is no easy money, and owning MNKD shares has not been easy with or without loaning shares. |
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Post by ezrasfund on Oct 19, 2015 9:58:08 GMT -5
Income rate has changed on your loaned securities
Thank you for participating in Schwab's Securities Loan Fully Paid (SLFP) program. We're writing to let you know that the income rate has changed for the following securities loaned to Schwab through the SLFP program:
Security Name Security ID Old Rate New Rate
MANNKIND CORP MNKD 28% 30%
Income rate changes for a loaned security are most frequently due to fluctuations in the supply and demand for that security.
WTF? Does this mean demand to borrow has increased yet again?
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Post by yossarian on Oct 19, 2015 11:44:32 GMT -5
Income rate has changed on your loaned securities
Thank you for participating in Schwab's Securities Loan Fully Paid (SLFP) program. We're writing to let you know that the income rate has changed for the following securities loaned to Schwab through the SLFP program: Security Name Security ID Old Rate New Rate MANNKIND CORP MNKD 28% 30% Income rate changes for a loaned security are most frequently due to fluctuations in the supply and demand for that security. WTF? Does this mean demand to borrow has increased yet again? You worry too much. Take the money and wait for the squeeze. |
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Post by cathode on Oct 19, 2015 11:49:00 GMT -5
Income rate has changed on your loaned securities
Thank you for participating in Schwab's Securities Loan Fully Paid (SLFP) program. We're writing to let you know that the income rate has changed for the following securities loaned to Schwab through the SLFP program: Security Name Security ID Old Rate New Rate MANNKIND CORP MNKD 28% 30% Income rate changes for a loaned security are most frequently due to fluctuations in the supply and demand for that security. WTF? Does this mean demand to borrow has increased yet again? Does it mean demand to borrow has increased? -- Not necessarily. Does it mean supply available to borrow has decreased? -- Not necessarily. Has one or both of these occurred? -- Very likely. |
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Post by tayl5 on Oct 19, 2015 15:15:26 GMT -5
Apologies for asking if these are really basic questions: If someones does a naked short, is there any benefit for them to retroactively borrow shares? If they sell shares but don't actually own them, doesn't that become a problem when they need to deliver the shares to finalize the transaction? If the way naked shorting works is obvious to everyone else, maybe I need to soak my head in a dark pool.
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Post by kc on Oct 19, 2015 15:54:51 GMT -5
The only risk that I can identify to the lender is that no shares are available to be returned in the event that trading is stopped (buyout) or the broker becomes insolvent. In these cases, the lender has been granted collateral in a separate account that is adjusted daily. It is possible that this collateral is thought insufficient in the event of a rapid price spike (buyout) where the borrower is simultaneously unable to make the lender whole, but otherwise stands to insure against such risk. Is there something I am missing in that? I don't think it will break Fidelity or Schwab. Mine are out with Fidelity to B of A. |
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Post by tonyz on Oct 19, 2015 16:02:22 GMT -5
The simple answer is naked short selling is illegal. I know there are situations where market makers and perhaps some institutions selling through mechanisms like "dark pools" etc. have a little extra time to match up shares sold short with shares borrowed, but for the rest of us, the shares have to be available to borrow before we are allowed to sell them short.
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