If Short Interests are continuing shorting while the share price increases, they are just increasing their potential losses. It is very risky to short a Company with such explosive positive developments. Shorts are relying on denial. But it is getting very difficult to deny such successful developments that Orbite Aluminae is outputting at outstanding pace.
I have made calculations that should be pretty much in line with the reality. It is not accounting for possible $0.45 and $0.80 Warrants already exercised since June 30, 2012. The $4.50 Warrants expiring on July 2012 have been removed since not exercised (share price below exercise price). So, the remaining Warrants (Outstanding Warrants) is 12,639,405, at an average exercise price of $3.63. As of September 30, 2012, the total Short Positions are 8,755,013 (5,898,710 on TSX/ORT and 2,856,303 on OTCQX/EORBF).
Estimate of the Short Selling average price is $2.58 - see Table 1 below (at the very end).
So, at current share price of $2.75, Short Interests would be “only” losing $1,488,352 ***if*** they could cover all of their short positions at that price.
Using the Warrants (allow covering at an average price of $3.63 – from Warrants at $0.45, $0.80, $3.20, and $4,50) would limit their losses to approx. $9,192,764 should the share price go higher – at current known Short Positions, and assuming they have 100% control of the Warrants. They could still keep shorting, but they would be increasing their potential losses. If they persist and short up to 12,639,405 (equal to total Warrant number), their potential losses could reach approx. $13,271,375 (a little less if they are shorting on the way up since increasing their average selling price).
This is of course assuming all of the Warrants would be used for short position covering. But at some point, it becomes more advantageous for the Warrant Holder to go Long. See Table below for various Warrant exercise prices & current approx. Short selling avg price.
So, we can expect Short Interests will first try very hard to bring the share price below their average short selling price. Last week, they were not successful in triggering panic selling – mostly margin accounts with marginability limit of $3.00 were triggered. They tried very hard and they failed, I don't see how they could be successful this week. We'll see. Once they see it is a dead-end, that success cannot be denied, we can expect they will try covering as many short positions as they can between now ($2.75) and $3.63, and continue covering below $4.50 if they can.
Note that Orbite can force the $4.50 Warrant exercise if the share price is above $7.50 for 10 consecutive trading days. So, these Warrants could be all exercised before July 2013.
There could really be a Stampede if the Shorts are not backed-up with all of the necessary Warrants to cap their losses or if there are more Short Positions than what is officially available (I think Clubhouse seems to believe there could be significantly more short positions than the "official"/reported numbers).
Longs can now easily see the obviously weak position of the Shorts. And, the real Company value has significantly increased since the recent 3.93 peak. HP-silica (with significant increase in expected profits), Fly Ash & 20% Opex reduction 30% fuel consumption reduction. And the trend is that positive developments will continue to pile up, plus we are only at 10-12 weeks from start-up and cash generation. Anticipation from Market should really show up.
Shorts should hurry up to be the first to cover and consider using their Warrants on the Long side…
Accumulate before the share price soars to where it belongs and don't let the shorts steal your shares. Don't get impressed by their smoke show. Crop the fruit of their several months of hard labor in trying to bring the share price down or cap it using all possible means.
But also, do not underestimate the Shorts and be extremely well prepared for an attempt [they will fight very hard] to bring the share price below their average short selling price. At least this time, they won't have any help from margin calls and each added short position is increasing their risks. And Orbite's pile of outstanding News should start to be taken into consideration. Would be also great to have some good News, hopefully on Monday to maintain the uptrend. Let's take care of the business and have success with Orbite success.
Hold on tight to your shares because the Big Guys want them badly. Remove any Stop Loss orders, especially now. If you want to sell, sell by yourself. Stop loss is the best way to give away your shares to the Big Guys...
Success cannot be denied.
From Nakate's post: