I believe this is a mistake and that many investors are completely oblivious to the risk of a trading halt, despite the increasing number of precedents. As with CCME, if the trading halt comes, it will come with absolutely no warning and those stuck with large long positions trying to make an easy day-trade could find themselves holding a completely illiquid stock with no "floor" at all. Longs are not the only ones who suffer from a trading halt. Those with excessive short positions will find themselves stuck paying an exorbitant rate (sometimes as much as 100% per year) for stock borrowing, which is subject to increase at the whim of the broker, and there is no way to cover for an indeterminate amount of time.
Both SCEI and GFRE have traded down to nearly the value of the cash last reported on their balance sheets. Many investors also assume that this somehow creates a floor for the share price, thus limiting their risk. However, in the China space, it is not at all uncommon for companies under fire to trade at discounts of more than 30% to their last reported cash balance.
Examples include:
 |
Investors are driven by fear and greed.
No comments:
Post a Comment