Friday, September 22, 2006

A Timely Article On Short Selling

SSG keeps you informed about developments in the satellite radio space, AND market forces that may influence the sector. Naked shorting, has been an issue of concern to investors, and the SEC!

Time to Bring Share Lending Into the Light
By FLOYD NORRIS, High & Low Finance, The New York Times, Sept 22, 2006

He who sells what isn’t his’n
must buy it back or go to pris’n.
— Attributed to Daniel Drew, 1797-1879

The annals of short selling have no better exemplar than Daniel Drew, whose career demonstrated both the risks and rewards of pursuing such an unpopular strategy. He made, and lost, several fortunes, along the way founding a Methodist seminary that bears his name. He died broke.
In an era when insider selling was not illegal — and, in fact, was deemed a sacred right of insiders — it was Mr. Drew who persuaded members of the New York City Council to first sell short shares of a railroad company controlled by Cornelius Vanderbilt and then to revoke the company’s license to operate a street railway in Manhattan. The idea was that the councilmen, and Mr. Drew, would profit when the share price plunged.
The scheme backfired when Mr. Vanderbilt bought shares, keeping the price from falling. Eventually he owned more shares than existed, leaving those who were short at his mercy. They needed to buy shares to cover their short positions and he was the only possible seller. The city councilmen were allowed to exit with small losses, in return for reinstating the license. It cost Mr. Drew much more to get out...READ MORE: HERE

9/22/2006 06:54:00 AM

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