*Really* bad week for SCO

[Colin McGregor]

"CLIFFORD ILKAY" <clifford_ilkay-biY6FKoJMRdBDgjK7y7TUQ at public.gmane.org> on Monday, December 08, 2003
6:44 PM wrote:

> At 17:33 08/12/2003 -0500, David J Patrick wrote:
> >JoeHill wrote:
> [snip]
> >>I think it's a good time to start selling any SCO stock you own...
> [snip]
> >That begs the question; are there any investment wizards in the group who
> >know how to "short" a stock and, thus" reap the reward for predicting
SCOs
> >(and soon enough M$s) swan dive ?
>
> Shorting a stock is not difficult or require great financial wizardry. You
> just issue a sell order with your broker without owning any stock. Your
> broker in turn borrows the stock from someone who already owns it. You
make
> money if the stock drops enough to cover your transaction costs and then
> some but only if you put in a buy order to negate your previous sell
order.
> You will in all likelihood have to put up substantial margin though.

This topic has come up in places like slashdot.org. the above is as I
understand things basically correct. What I gather is missing is all this is
the fact that I gather SCO stock is not widely held enough to make shorting
at all easy. In other words getting enough stock that you could short it
would be an issue. The other point to note is that shorting places you in a
situation of unlimited liability. Yes, like everyone else here (at least I
hope like everyone else here) I expect that at some point soon SCO share
certificates will make for good toilet paper (as that will be much they will
be worth). The problem is that SCO may pull a few stunts (or get lucky (a
drunk/stoned judge?)) along the way that will (for a time) cause the share
price to spike up.

Say for the sake of argument SCO manages to blackmail or bribe a judge in to
letting them win round one, SCO share prices jump for $14 to $14,014, you
expected SCO to drop to $10 by the time you had to deliver the shorted
shares at $14. So on an order of 1000 shares, your out of pocket $14,000,000
instead of making $4,000. Obviously this is an extreme example, but shorting
a stock is a MAJOR short term gamble on what is clearly a near certain long
term event (the effective (or hopefully total) destruction of SCO).

So, changing topic who here other than me has made money off SCO in the past
month? I went out to the SCO City-to-City event and grabbed some free stuff,
which I have in turn sold off via eBay (I've got a nice SCO T-Shirt if
anyone wants to make me an offer (last one went for $51 (U.S.) on eBay)).
Ok, so on a $/hour it has been a poor return, but I do take some pride in
scoring a few bucks of SCO at effectively zero risk :-) .

> Keep in mind a few things. First, there are people who trade stocks for a
> living and they have access at the very least to the same information you
> do. The current price for SCOX reflects their expectations. Second,
another
> company coming along and taking SCO out might dash your dreams of becoming
> rich, rich, rich. Third, you have to analyze the risk/reward ratio. If the
> risk free yield is 3% today, you have to do much better than 3%, how much
> better is up to you, in order to make it worthwhile. Finally, unless you
do
> this for a living, the odds are against you that you will make money doing
> this. You should avoid speculating with money that you cannot afford to
> lose. In other words, if you feel confident that this is a winning
> strategy, and you have analyzed the risk/reward ratio and determined that
> it is acceptable to you, and you are doing this with money you can afford
> to lose, by all means, go for it. Otherwise, you are just another sheep
> waiting to be sheared by the pros in the business.
>
> >Should we get a group thing going ?
>
> If you feel that strongly that shorting SCOX or MSFT is a good move, why
> wait for anyone else? You don't need a "group" to do this.
>
> >hmmmm ?
> >djp
>
> Regards,
>
> Clifford Ilkay
> Dinamis Corporation
> 3266 Yonge Street, Suite 1419
> Toronto, Ontario
> Canada M4N 3P6
>
> Tel: 416-410-3326
>
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