I’ve found an interesting niche in the market that I’d like to share with my readers. I hope the theory finds you well and you may use it to your benefit. I’ve found an increasing amount of people short selling small cap companies with small amounts of float. The problem with this is that sometimes these short sellers are blindly shorting companies that don’t have many shares available. This in turns causes the short sellers to not have the opportunity to buy back there shares. The only way a short seller can escape this problem is by either selling at a much higher price or hoping the company severely dilutes its shareholders and then sells those shares to the numerous short sellers. (Of course there’s the possibility of naked short selling) This short selling strategy falls apart when a company in distress still finds value in its shares because of asset values or voting power. So companies may not be willing to heavily dilute shareholders. Other major shareholders may still want to control the shares for voting power so when a company reorganizes they have a “say so” in the process. I’ve found that scoping out these opportunities can be very lucrative.

Advertisements