Member Info for das180

Https://www.ad-hoc-news.de/boerse/news/ueberblick/itm-power-s-flexible-future-operator-roles-and-the-stock-market-s-demand/69485168

If ITM were to get their name on the side of this, then that might be a good PR stunt.

https://www.bbc.co.uk/news/articles/cewp0pvgxzwo

Don't shorters have to put up collateral against the shares they have borrowed (and subsequently sold). Otherwise the lender would be giving them an unsecured loan, which would be risky for the lender?

Sorry, I'm still trying to understand the details of the shorting process. Here's my current understanding (much better than it was an hour ago!).

During short sales, there’s usually 3 parties involved - the current holder of the shares, the broker, and the short seller. When the short seller asks to borrow, they do so from the broker. The broker then either looks in their own inventory, other customers’ accounts, or other institutions and hands over the stock from one of these sources to the borrower. The borrower usually has to put up collateral worth more than the borrowed amount in the event they are unable to return the shares. Additionally, the broker is paid a fee up front by the short seller for the privilege of borrowing.

So from the broker’s POV, i all they care about is receiving those shares back by a certain date. They hand over the shares from one of the 3 sources above, collect the collateral and fees and just bank it. If the stock tanks, all goes to plan and they get it back from the borrower with no issues and the stock broker returns the collateral If the borrower is wrong and the stock rallies, the borrower have to find a way to give those shares back to the broker. If they can’t, they get margin called and the collateral is liquidated.

So where does the broker stand if the borrower does sell the borrowed share and make a profit? The borrower will be returning the shares to the broker, at a lower price as to when the borrower borrowed the shares (otherwise the borrower won't make a profit). So now the broker has the interest fees on the loan, and a bunch of shares that have dropped in value. That might be okay if the broker has a long term view on the shares - ie they will recover. But if the company goes bust, or doesn't recover for years and years, then hasn't broken lost money (on paper) with no hope of retrieving it? I'm not sure the interest on the loan would be great compensation for that risk. It would have been (imho) much better to sell ITM at 400 when it started dropping and just buy back in at 50, rather than lend shares to someone and then wait for them to recover.....

Or is the broker taking the view that shorter is wrong, and the shares will go up. I did not think broker's liked to gamble. They are surely like bookmakers, and just arrange their business to be profitable by adjusting the odds the punters take.

Oops, sorry, I meant to say Smac50. Still not sure how the shorts can force the price down (and profit from that).

Smac: thank you, I missed the money brought in buy selling. Fortunately, I don't make a living doing this - I would be on bread and soup.....

Can you explain how the shorts can force down the price? I admit I don't really understand the mechanics of this but my understanding is a 'short' is someone who has sold a share they don't originally have with the promise of buying this back in the future. Okay, so how do you sell something that you don't actually have? Well you borrow the money (from a broker?) to fund your temporary ownership of that share, and thus pay interest on that loan. So let's say you shorted one share of ITM at 400 way back, in the hope of buying it back at 100 - thus making 300p. But you had to pay interest in the interim, on the 400 debt you used to fund the original share - but thats okay, say 5% for a few years on 400 is maybe 100p. So net gain, 300-100p = 200p. You are a happy shorter.

But lets say you don't buy back your share at 100p. And you see the price now rise as it has done to around 160p. You are greedy, so you want to force the price down. How can you do that? Normally, the more shares people want to sell, then the more the price will depress itself (on a supply and demand basis). So you could depress the price by offering a bunch of shares onto the market for people who wanted to buy. If you offered a lot of shares, that would help push the price below 150. So far so good. But you are shorter - so you don't actually have any shares in your hands. And if you bought a million shares (if that was practical) at 150, then offloaded them to try and depress the market that sounds like its not going to work well as where will you get the money to buy those shares and won't you just make a loss as the price depresses anyway?

So how do shorters, even with their considerable financial resources, control the price? (If they increase their short position, that may well push the price down, but aren't they just making things worse for themselves in the long term? And if they decrease their short position, they will be creating buy demand in the market and push the price up).

A simple minded question: If Helikon took their short position at an averagish price of 70p to 100p why didn't they close it and take profits when the share price was down at 30 or 40? The SP could not have gone much lower, so they were at the point of maximum profit? Genuine question. Why wait for the SP price to go back up and thus reduce their profit? Or am I missing something?

Is there a link available to watch the AGM online?

thanks

Regarding:

"Das, I'm a pro Engineer and it might help if you stopped calling the shooters and called them borrowers. Imagine you borrowed 25% at 70p, 25% at 60p, 25% at 50p and 25% at 40p. If the SP hits 20p they make money, if the SP hits 90p they make money. It all depends on what they do with it... probably."

I'm sorry, I don't quite understand this. If they short and the price goes up, then surely they are going to loose money if they close their position, even if they shorted at a spread of prices? How do they make money if the price goes to 90? Am I being dim (not unusual)?

Well, yes, I really am an engineer. And I really don't understand the algorithms that drive the markets - and I'm not sure anyone else does. In any case, I doubt whatever I said on a bulletin board is going to make any difference to the share price, ITM profits, or the world in general.

Thanks for those who answered. I understand a little more. But it seems hard to really know what's going on. Holding both short and long positions seems to me like it's never going to work, i.e covering your shorts with longs will protect against losses in some ways but also potentially reduce your profits in other situations. It's like going to the racecourse and backing both the favourite and the outsiders. The system is rigged so that you can never win doing that - only the bookies make a profit if you do that. At some point you have to take a gamble, ie take a risk. And for something as oddly behaving as ITM it's really hard to know what is a good or a bad bet (without hindsight).

First - I'm an engineer and not an investor - primarily interested in different sorts of green energy an hence interested in ITM's tech. But having been watching the ITM share price over the last few years, Iis:'ve got a simple question. As I say, don't beat me up, I know I don't understand the nuances of the stock market. My question:

It appears that some organisations have been holding a short. position on ITM for some time - and in particular when the sp went down to 30 ish. Why wouldn't you sell (close?) your short position immediately at that point? The s.p could not go much lower (and if you bought at 100 or 300 or 500) then if you wait longer hoping the s.p. will go to 20, 10 or 0 you are not going to make much more profit anyway? Surely a bird in the hand etc in that sort of situation...

So what was the point of continuing to hold a short position when the s.p was at 30 ? (You are presumably paying interest/fees to keep that position open). I don't get it. But then the stock market is a strange place.....

thanks