Emblem Corp - Short players double down, borrowing and dumping nearly 500,000 more shares (EMC.V - EMMBF)

Short interest for EMC.V was just updated, current to January 15th 2016 and that number climbed an additional 496,900 shares to a new total of 952,900...

Again that's only current to January 15th and does not include any activity over the past three days of trading.  That means it is conceivable that the number could be even higher now.

Why would short players increase the size of their bet, more than doubling the previously reported number of shares borrowed and dumped back into the market from the January 15th update of 456,000?  I think the answer is fairly obvious, nobody likes to lose.

Retail investors are notorious for being price sensitive, viewing a rising share price as strength and a falling price as weakness.  Up is good and down is bad.  Its the inverse of what happens when people go shopping for things like groceries.  

My local store puts instant coffee on special every so often, selling it for a discounted price of $2 per jar as opposed to the regular price of $6 or so.  When I see the price drop to $2 do you think I take the jar in my cupboard that I paid $6 for and rush out and try to sell it?  Of course not. Instead I buy 10 jars at the lower price, confident in the knowledge that in another week's time the cost will be back at $6. 

The key word there is "confident".  I know with almost 100% certainty that the price of my coffee is going to return to $6.  When it comes to stocks however, retail investors typically lack that degree of confidence.  And players on the short side can impact what confidence long investors have by borrowing a significant quantity of shares and dumping them back into the market to depress the share price.  Their hope is that shareholders will get scared:  "The price is falling, things must be bad".

Should Emblem Investors be confident?  I think so, but as a shareholder my views are biased and should be viewed in that light.  

Obviously everyone is forecasting the Canadian Marijuana space to be an absolute monster in the years to come with overall revenues forecast to be in excess of $20 billion according to a recent study conducted by Deloitte.  (TorStar Article). 

Emblem specifically has an incredibly talented executive team leading it, arguably the strongest in the entire sector, with luminaries such as John Stewart formerly of Purdue Pharma heading up the pharmaceutical side of the business.  I don't think there's another player in this space with experience running a billion dollar company.

But that doesn't mean there aren't risks.  

The market is going to be highly competitive, with more and more licensed companies fighting over market share.  And there's always the chance that the Justin Trudeau government could back off on their pledge to bring forward their plan for legalized recreational weed, expected this April.  Given the poor state of Ottawa's balance sheet I don't consider that to be likely, however I have to acknowledge that it is a possibility.

Suffice to say there are risks, and risk can lead to uncertainty which causes fear and doubt.  And short players can exploit that fear by borrowing significant quantities of shares and reselling them into the market in order to lower the price of the stock.  

I won't belabour the point further, obviously those players on the short side have shown that they're willing to step up and increase the size of their overall position.  And I have no delusions that this miserable and pathetic little blog will rally retail longs to defend the PPS by holding and possibly even buying more.  

Taking out a sizeable short position takes a big bankroll because of margin and maintenance requirements.  What's that old expression:  "In for a penny, in for a pound".  In the weeks and even months ahead I will not be surprised if short side players up their bets even higher.  Only time will tell if it works.

If you watch social media expect to see the number of posters confidently proclaiming Emblem to be overvalued to increase.  With almost 1 million shares borrowed and sold bears will need investors convinced they overpaid and that selling would be a prudent move.

If you missed my first post on the short situation with Emblem you can read it here: 

Emblem Corp - Short Interest hits almost 500,000

I will leave you with an old video I've shared on here a number of times before.  Its Jim Cramer of Mad Money fame talking about the strategies he would use when he was "position short" to influence the sentiment of "moron longs" who fixate on price price price.

Its a dirty little game in the public markets, and knowing the ploys of the bigger players can help retailers make better decisions in my view.  Good luck, comments are welcomed as always but no profanity please.