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Novastar Financial, Inc (NFI)

NFI's S-3 Shor...

NFI's S-3 Short Squeeze

mhatmccane

409 posts

Joined
1/20/2006

NFI's S-3 Short Squeeze
Posted: 21 Apr 06 11:13 AM

WOW, read that S-3 carefully
by: barabuss3

04/21/06 01:05 pm
Msg: 424526 of 424545

NFI could have "cracked the code" for closing out the naked short position in its stock.

From the S-3...

"(e) You may also elect to deposit with the Plan Administrator, at no charge, Common Stock certificates registered in your name for safekeeping. Because you bear the risk of loss in sending certificates to the Plan Administrator, certificates should be sent by registered mail, return receipt requested, and properly insured to the Plan Administrator at the address specified in Question 4."

later in the article...

""Beneficial Owners who wish to enroll in the Plan must instruct their bank, broker, or other nominee in whose name their shares are held to participate in the Plan on their behalf. The bank, broker, or other nominee should then make arrangements with its securities depository and the securities depository will provide the Plan Administrator with the information necessary to allow the Beneficial Owner to participate in the Plan. Beneficial Owners are cautioned to ensure that their broker, bank, or other nominee passes along the proceeds of any applicable discount to the beneficiary’s account."

This is brilliant. If I understand this correctly, current NFI shareholders of NFI can now elect to deposit any of the shares which they currently own into this plan! Think about that. Doing this results in the removal of those shares from the DTC investment pool which is being used to cover the naked short positions. If a few major mutual funds do this, there could be a major squeeze in the stock. In addition, this plan allows for future timed purchases to be made directly from the company. And, those timed purchases are not limited to $10,000 per month because, according to the S-3, wavers can be obtained by brokers and others who wish to make larger purcases. I do not have enough in-depth understanding of this to grasp all of the possibilities here. But, one possibility is that major mutual funds make future direct buys of NFI shares from NFI to the tune of $$$millions$$$. NFI could than, possibly actually buy stock in the open market to fill those orders and demand the delivery of the certificates to be deposited in the vault of the bank in Kansas who is managing this. This could provide a blue print for all companies who wish to screw these shorts to the wall.

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Specific Stocks

Novastar Financial, Inc (NFI)

NFI's S-3 Shor...