Original Discussion in r/stocks:
Original Article by James Stafford:
Hordes of new retail investors are banding together to take on Wall Street. They are not willing to sit back and watch naked short sellers, funded by big banks, manipulate stocks, harm companies, and fleece shareholders.
The battle that launched this week over GameStop between retail investors and Wall Street-backed naked short sellers is the beginning of a war that could change everything.
It’s a global problem, but it poses the greatest threat to Canadian capital markets, where naked short selling—the process of selling shares you don’t own, thereby creating counterfeit or ‘phantom’ shares—survives and remains under the regulatory radar because Broker-Dealers do not have to report failing trades until they exceed 10 days.
This is an egregious act against capital markets, and it’s caused billions of dollars in damage.
Make no mistake about the enormity of this threat: Both foreign and domestic schemers have attacked Canada in an effort to bring down the stock prices of its publicly listed companies.
And big banks and financial institutions are turning a blind eye to some of the accounts that routinely participate in these illegal transactions because of the large fees they collect from them. These institutions are actively facilitating the destruction of shareholder value in return for short term windfalls in the form of trading fees. They are a major part of the problem and are complicit in aiding these accounts to create counterfeit shares.
Their MO is to short weak, vulnerable companies by putting out negative reports that drive down their share price as much as possible. This ensures that the shorted company in question no longer has the ability to obtain financing, putting them at the mercy of the same funds that were just shorting them. After cratering the shorted company’s share price, the funds then start offering these companies financing usually through convertibles with a warrant attachment as a hedge (or potential future cover) against their short; and the companies take the offers because they have no choice left. Rinse and Repeat.
This predatory short activity by hedge funds did, in fact, happen to Canadian pot stocks before the COVID crash last year.
Which other Canadian stocks are being attacked like this?
McMillan also noted that “the number of short campaigns in Canada is utterly disproportionate to the size of our capital markets when compared to the United States, the European Union, and Australia”.