I am neither a lawyer nor a securities professional and no one should follow my financial advice if were to offer it. But, I am happy to ask dumb questions from time to time for self-education.

Today’s dumb question relates to dealing with naked shorts.

If I understand it correctly, part of the problem with naked shorting is that a share price can be manipulated downward by flooding the market with sell orders where the “seller” doesn’t care if they can deliver the shares or not. If they can cover their naked short sale, great. If they cannot and they “lose” the sale because the sale fails for lack of delivery, also fine, because the damage caused by their naked short sale orders can benefit them in other trades over time. (If I am wrong about this stop reading because this is the premise for what comes next.)

OK… So if the above paragraph is correct… what can be done about people and funds that don’t actually care whether they can deliver shares and simply want to freak people out into selling at a steep discount?

Would it be possible, as part of a NCIB, for Pyrogenesis to step into the market and to buy 100 lots of 10 shares when it appears a high volume of naked short orders is happening? The small lot sizes would be there to create a larger n value of trades to bring patterns into focus. If more than, say, five percent of the orders were FTD (failure to deliver) — which would be well over the amount that might fail for “normal” reasons, then wouldn’t Pyrogenesis’ legal team then have legal standing to investigate the abnormal FTDs? To demand document production? To develop evidence of intent to manipulate? To have a possible cause of action? To make various brokers have to explain in writing why they are not in fact turning a blind eye to allow obviously impossible to fill orders to get to market? To incentivize market players to ask tougher questions before they enable... shenanigans? In short, could the NCIB be weaponized against naked shorts and their witting enablers?

Again, see my first sentence. If this makes no sense, I am not offended if you tell me so. Am just hear to learn.

But, if there is something to it… that would be interesting to know as well.



PS: Thank you to Wheresjackbenny for the Phantom Shares links and making me look up the OBO/NOBO distinction in beneficial ownership.

PPS: Also… it’s funny. I have the occasional weird gratitude for the @$$hats that are depressing the share price (if they exist) so I can still accumulate while on a budget. But I don’t like that players can mess with the market in bad faith and with no consequences.