I was thinking today about the proxy battle that was going on with Noront. I was also thinking about the post where somebody mentioned the price of the NOSOF shares today being in the .70s.

With the current exchange rate of just over $1.25 CDN for $1 US, this price is not that far off of the TSX price.

For those who don't know, Noront trades in the US on the pink sheets with a symbol of NOSOF. This symbol was listed on the naked shorts lists (www.buyins.net) back in January 2007. It has since been removed.

I will not go into what naked shorting is here for those who are unfamiliar, but let's just say that it is a broker who sells shares they don't own and rather than buying them back at a future date (as regular shorters do) they claim that the transaction "failed to execute".

There have been documented instances in the past where naked shorting of certain companies was so prevalent, that the number of shares voted at an AGM exceeded the amount of authorized and outstanding shares in a company.

This thought crossed my mind:

How many Noront shares exist out there because somebody bought them from a hedge fund or broker who naked shorter but never covered?

What if by some stroke of luck more shares are voted at the AGM than actually exist because of past naked shorting?

When I think about how many shares traded in December 2006, it was obvious that naked shorting was rampant. The entire float of 60M shares traded hands in a five day period, including one day where 18M shares traded. This when the volume averaged under 100K a day in the weeks prior. I wondered how many crosses took place but I also wondered how much the stock was shorted in order to keep the obvious future PP at a low strike point.

Could this activity come back to haunt these goons?

Yes, if the amount of shares on the voting block exceed existing authorized shares.

Could it be I have not received a proxy form because my shares do not really exist from Noront's perspective? Maybe they were sold by one firm who did not own and cover them but were still listed in my CIBC account as they were short sold.

I'm not sure.

What I am sure of is that if the outstanding share count is exceeded in this vote, an investigation will take place that will see a trace back of transactions that could lead back to the current players who are now attempting to take over this company.

A wise man somewhere once said "Be Careful what you wish for as it might actually come true." Should this proxy vote create an investigation into fraudulent selling practices, these guys might not only lose the vote due to excessive retail holdings of shared sold in a naked manner, but also lost a lot more in terms of fines and possible license removals, not to mention the bad press.

It is an outcome I would love to see!

M1.