Blame it on the short sellers! That’s the line that some promoters try to sell when a company’s share prices have plummeted.
It’s an easy rumor to start. Just send out a million e-mails to hungry investors; claim that there has been improper and unlawful short-selling of over the counter stocks; and drop a few hints on online message boards like Raging Bull. Then sit back and watch the rumors spread like wildfire.
Sometimes, the company will even adopt the party line – blame it on the short sellers!
And sometimes it may be true. But not always, and the problem is that investors have no easy way to tell the difference because (as logic would dictate) there is no reported record of an illegal short position.
This is precisely the dilemma confronting investors who have been following events at 3 E International Corp. (Pink Sheets: TEIL). As we reported last week, an online investment newsletter called SkyMarket Direct has been suggesting that 3 E stock could soar as high as $100 a share – a quantum leap from the present 35 cents per share price. That projection was based upon the entirely unsubstantiated notion that 3 E would inherit an outstanding 6.5 million share short position from Corbel Holdings, Inc. as the result of a merger between the two companies. See Update: 3 E International Corp. – Coming Up Short.
According to the theory offered by SkyMarket Direct (among others) Corbel had inherited that massive short position when it was spun-off from its parent, Pinnacle Business Management, Inc. Pinnacle, which planned to issue about 4.5 million Corbel shares through the spin-off, claimed that far more Corbel shares had been requested by brokerage firms - approximately 10 million shares in fact - a discrepancy that Pinnacle blamed on the alleged short-sellers.
As if that were not confusing enough, there was one more complication. The individuals who received Corbel shares through the spin-off would only be getting about 45% of the Corbel stock. The rest of the shares - approximately 5.9 million - would go to unidentified parties.
What does all of this have to do with SkyDirect’s audacious prediction? Based upon the latest press release from Corbel – which now calls itself Cobe – it appears that there is no short position for 3 E to inherit.
On August 22, 2002, Cobe issued a press release announcing that its merger with 3 E was ready to proceed. According to Cobe, 11,315,774 shares of Cobe stock, representing approximately 90% of the total issued shares of Cobe, had been delivered to the transfer agent, Mandalay Stock Transfer, to be exchanged for 3 E shares.
So much for that short position. Those 11,315,774 Cobe shares would appear to account for the 4.5 million spin-off shares and the 5.9 million shares of Cobe that had been slated for parts and persons unknown.
That 5.5 million share short position had disappeared - if it ever had existed.
In short, making short order of the short argument.
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