If you do that, just understand that you’re gambling.….which is fine, so long as you go in eyes-open.Thanks for bringing this to my attention, I’m actively Looking into strategies that will let me Short MSPR
The pre-opening price this morning (July 15) is $1.70.…down almost 83% from the price immediately pre-listing. So a few things to consider:
1. Your potential gain from a short is limited to the current price, which is already in the toilet.
2. What’s tanking the price is that investors don’t have a clue as to the true value of the claims MSPR is pursuing.
3. Your downside is theoretically unlimited, but it would not be unrealistic to lose more than the initial short.
4. This stock is thinly traded, which introduces a market liquidity question that could affect your ability to get out if you want to.
The claims might that MSPR is pursuing might be totally worthless. Or there might be some value….but nobody knows how much. The strong feeling is that, if the claims have any value at all, it’s nowhere near what was represented in the listing documents.
One significant pitfall with a thinly-traded stock: If your short gets out of the money (i.e., the share price actually rises), you could get caught in a short squeeze you can’t cover. That’s where you want out, but can’t find enough shares to buy to cover your short — that’s where the thinly traded part really hurts. So you’re paying margin calls, and are helpless to stop the music until you can accumulate enough shares to cover the short position.
Shorts are a great tool, and contrary to what some people believe, actually help to stabilize the markets. But to make money with them, you not only have to be right on the general direction of the share price, you have to be exactly right on the timing, or be willing to make margin calls.
It’s hard enough when you do have reliable financial information. You cross the line from investing to gambling when you don’t have reliable information.