I read a post on the Yahoo OSTK board today, and it got me thinking long and hard as to the answer to the question, "How do the bad guys get out of OSTK with their skin, much less with a profit?"
And I think I have the answer.
Be prepared - it is as cynical and sociopathic and manipulative as anything you will ever read here, and it has the stink of truth to it, at least to my nose.
First, the manipulators and their facilitating brokers drive the price down to the mid to low $20's, maybe lower, using massive naked short selling on virtually any pretense - OSTK "only" doubles industry growth, Byrne is crazy, whatever - the pretense is incidental, it is the naked short selling in huge volume that does the job, along with some good old panic selling.
Next, they have a sympathetic buyer offer $24 for the company, when it hits $20 - hell, that's a premium to the suddenly and inexplicably depressed price, and will be positioned as a reasonable offer!
If the board takes the bait, first act is to boot Byrne, and the shorts have locked in their profit - virtually all of the tens of millions of naked shorted shares are above the offer number, so the only ones that lose huge are the buyers of the stock over the last 2 or so years, and the company - the manipulators make a killing, and they eliminate their biggest critic in one fell swoop. And they make the lawsuit go away because as part of the deal, on the back end, they require the company to drop the whole silly matter - who wants to buy a lawsuit and controversy, especially with Byrne gone?
More likely, since the Byrnes and friends own a majority of the shares, the board doesn't take the bait, and the company is slammed with a massive class action suit by "outraged shareholders" (no doubt who bought shares specifically for this purpose), and the SEC comes in to "investigate" the matter, further tanking the price (or even better, halting trading) and allowing the shorts to largely exit at a massive discount, or eventually make another bid for the company at an even lower price.
And everyone wins, except the shareholders and the company.
Sound far-fetched? Why? Other than the fact that it is illegal, why precisely wouldn't this achieve exactly what they want, and be virtually impossible to defend against? Damned if you take the offer, damned if you don't, and no limit to the number of naked short shares willing to be dumped, as they will all remain in the money, forever.
It is beautifully symmetrical, is a massive 10b5 violation, and racketeering to boot, and is the likely exit, IMO.
It has all the requisites.
All.
And it is do-able.
Don't think these things happen? Look at the Terrayon case, where Milberg Weiss represented aggrieved shareholders - who turned out to be hedge funds that were short the stock!!! This happens all the time.
Now, there's a small problem - I just called the play. I am doing so publicly, as I did on NFI, well in advance, and I am here to tell the world that this is how these guys work. The timeline is likely much shorter than in NFI, probably within the next month or so, 45 days on the outside, because it all has to go down before the judge rules on the SLAPP motion and discovery is likely granted.
Farfetched? So was the notion that a group of miscreants could be doing abusive and fraudulent loans from over a hundred S&L's for years, in full view of their buddies the regulators. And yet that is now established historical fact.
This makes complete sense, is entirely consistent with all past manipulations we've seen, and is pure evil.
Comments? Any reason this wouldn't work? Anyone able to see any reason it isn't the perfect exit? I originally thought that they would have to use a different agency than the SEC, as the SEC doesn't have a good reason to go after Byrne at present, thus my ruminations about the DOJ or whatnot - but what if the manipulators could contrive the perfect reason for the trading to be halted or an investigation launched? It is really elegant, if I'm right.
Question is can they still do it now that I am publicly calling it? It is a widely followed story at this point.
Do they do this even though the veil of secrecy is blown, or is secrecy essential to their strategy? I suppose we might just find out.