Resverlogix - Short interest climbs for a 5th consecutive period

Canadian stocks listed on the TSX and TSX Venture report short interest twice per month, once on the 15th  and again on the last day, with the number being disseminated three days later.

On May 31st 2016 short interest for RVX was reported at a mere 1,500 shares....basically nothing. With each subsequent update the number has climbed slightly: First to 23,200 then 27,000...then 30,633....and then 33,500 shares.  The number is now reported at 43,400 up to August 15th 2016.

43,400 isn't a big number, only 0.04% of the 105.2 million outstanding shares...hardly worth worrying about.  Of note however is that Yahoo Finance shows average daily volume over the past 3 months as just 17,612....so 43,400 represents over 2 days of trading on the TSX for RVX.

Why there would be any short selling of a company in a Phase III trial for patients with Diabetes Mellitus, one that's trading for less than $1 US, is beyond me.  But it is a question worth considering in my opinion.

Short selling is generally considered to be a "bet" that a stock is going to fall in price.  Shares are borrowed and sold, with the goal being to buy them back at a lower price, with the short seller pocketing the difference.  The best case scenario for a short seller is if a stock goes to $0.00, which means 100% profit.

For the sake of argument we'll say that all 43,400 shares that have been shorted...that they were sold for $1 US by one individual.  That would mean that in the best case scenario the short seller could make a profit of a whopping $43,400 USD less brokerage fees if Reservlogix were to go to $0.00

Given the risks with shorting, why even bother?  While a stock can't fall below $0, theoretically there is no limit to how high it can go.  Being long I consider it very positive that short interest is so low. If around 10 million shares were shorted...or more, that would be a red flag for me.

I would consider it very possible that maybe those selling RVX short, that maybe they know something I do not.  But .004% is almost meaningless.

It may simply be that Market Maker Broker Dealers haven't had shares to sell when buy orders have come in, and it could suggest that RVX is tightly held.  It could also be there are bullish longs trying to accumulate who are selling a small number of shares short in an effort to keep a lid on the PPS and to test the patience of retail shareholders in my opinion.

The last news RVX put out was on August 11th after the Data Safety Monitoring Board (DSMB) gave the company a positive recommendation for the continuation of the phase III BETonMACE trial, the goal of which is to prove that Apabetalone will positively impact the occurrence of Major Adverse Cardiac Events in Diabetic patients.

The DSMB reported no safety or efficacy concerns.

http://finance.yahoo.com/news/resverlogix-announces-positive-recommendation-data-110000475.html  

Going forward there are some events coming up:  

• Aug 27 to 31 European Society of Cardiology Congress
• Sept 11 to 13 Rodman & Renshaw
• Sept 12 to 16 European Association for the Study of Diabetes (EASD) 
• Sept 13 to 15 Biopharm America

In my opinion though, the biggest potential catalyst will come from the futility analysis for the BETonMACE trial.  The trial is events based and will be completed when 250 Major Adverse Cardiac Events occur.  In this trial MACE is defined as stroke, heart attack or death.  The futility analysis is due at the halfway point, 125 events.  

If the futility analysis is positive and the trial continues, then in my opinion there is real potential for an explosive move in the PPS from current levels.  Of course as a shareholder my opinions should be considered extremely biased....in fact I added a small number of shares to my existing position today.

Good luck

Resverlogix - Grossly undervalued in my opinion, if they succeed....

My most recent post was about story stocks and "The Emperor's New Clothes".  Basically I wrote that any company with negative earnings and little to no revenues....that they're clothed in rags, and that Investor Relations types endeavour to create the impression that these rags are in fact a gorgeous outfit worthy of attention and investment.  

The "story" is what these companies wear in the absence of solid financials, and if the promotion works a company's PPS can soar if investors see a spectacular outfit instead of dirty cheap threads. But ultimately and long term, a story can only do so much. Eventually the chickens come home to roost and to deliver long term shareholder value the story has to come true.

Resverlogix has a story, but its not being promoted far and wide.  You won't see cheesy podcasts with the CEO being interviewed by someone with scripted questions.  Of course current shareholders, especially retail investors, they want news and information, and the company has been very forthcoming in keeping those who've risked capital in the loop.  

Here's a video the company put out itself and uploaded to their own YouTube channel:

Currently Resverlogix has a market cap of about $130 million CDN or about $100 million USD.  Is that a fair value?  In my view its a mug's game trying to assign a valuation to a company that is highly speculative, $100 million, $25 million....$250 million, $2 billion....pick a number.  

Resverlogix is attempting to prove that its drug Apabetalone can reduce the occurrence of Major Adverse Cardiac Events, or MACE, in patients with a form of Diabetes called Dibates Mellitus.  The company is currently engaged in a phase III trial the goal of which is to prove just that.  Beyond Diabetes there are also other diseases which Apabetalone may be able to address such as Alzheimers, Cardio Vascular disease and Thrombosis.  With our aging population  the number of people suffering from diseases such as these is only going to increase. 

Why do I think trying to assign a market valuation is a "mug's game"?  

As a point of comparison I would suggest looking at Esperion Therapeutics, (ESPR on Nasdaq). Esperion is engaged in the development of, among other things, the treatment of patients suffering from Cardio Vascular Disease and with elevated levels of bad cholesterol or LDL.  Its not a perfect comparison but I think its close, especially considering both companies are development stage.

Shares of ESPR went on a wild ride in 2015, going from less than $20 for most of 2014 to over $100 by the summer of 2015.  With about 22.5 million shares outstanding at the time, at $100 per share ESPR's market capitalization climbed to over $2.2 billion.  Currently shares have been trading in the range of $10 to $11 over the past couple of months with the MC falling all the way down to about $250 million USD.

How did a development stage company go on such a wild ride and attain such an incredible market cap?  I would argue they had a really good story about lowering bad cholesterol and told it well at events like conferences sponsored by investment firms.  They had good top line results in phase II studies and investors got excited over the potential market and the share price was pushed higher and higher accordingly.  

Why did it all fall apart and come crashing down so hard?  To be perfectly candid I don't know, I suspect that the excitement wore off, ESPR is advancing in its efforts to combat Cardio Vascular Disease (CVD) by trying to reduce LDL.  But CVD trials take a long time and are probably among the most expensive treatments to pursue.  It may be that investors simply lost patience.  

I do think that if Esperion succeeds that a MC in the billions is not unreasonable, I feel the same with with Resverlogix.  In terms of Resverlogix I'm glad to see them targeting a disease like Diabetes Mellitus instead of CVD given the time and cost associated with conducting trials for Cardio Vascular indications. 

Success or failure though is the ultimate litmus test.  Investor roadshows and conferences can do a lot to raise a company's profile and also its share price, but as the ESPR roller coaster ride shows, share appreciation can be fleeting.  

Here's hoping both companies achieve ultimate success, that neither will need IR tailors to convince the great unwashed that the clothes these companies are wearing are in fact worthy of attention  

Story stocks and the Emperor's new clothes....

If you'e unfamiliar with the fable "The Emperor's New Clothes" its an old tale about an Emperor who engages a couple of new tailors who promise to outfit him in the most exquisite outfit imaginable. 

They tell the monarch that the fabrics they are using will be totally invisible to those who are not fit to be in their positions, that or totally stupid.  Of course there is no fabric, but when they pantomime dressing the Emperor in his new outfit he praises the skill of the tailors and the beauty of the rainment because he doesn't want anyone to think he is unfit for the position of Emperor.  Likewise his ministers, advisers and other members of the court, they too praise the outfit, falling over each other to describe how incredible it is.  

Word spreads throughut the kingdom that anyone unable to see the Emperor's wonderful new clothes, that they will be judged unfit for the position they hold.  And so the King leaves the palace and marches among his people with everyone applauding and cheering, until a young boy proclaims that the Emperor is naked.

Sometimes I feel like that young boy.

With public companies there are those that are clothed wonderfully with profits and dividends that get distributed to shareholders.  Others are not so well attired, but they perhaps have robust revenues and its just that expenses are greater than what is coming in.  Bring expenses down or increase revenues sufficiently and they too will get an upgrade in their wardrobes.  

And some companies have nothing.  Little or no revenue and zero profits, only losses.  All they have on are the rags of an accumulated deficit.  But they have a story, a wonderful story.  It might be a miracle drug that's going to cure cancer or some other disease, or a potential mine that will overflow with precious metals, or a new technology or application which will revolutionize the world or at least an industry, a new clothing line, an incredible new beverage....the list is almost endless.

And some will succeed.  Some will develop that drug, or that mine, or that killer application....but many more will fail.  

In my opinion the fable about the Emperor's New Clothes comes into play when there's an abundance of:  Promotion, News and Hype.  When too much effort is employed to make shareholders and prospective investors believe that the Emperor is wearing the most exquisite outfit imaginable, its time to be cynical.  If social media pundits attack anyone who doesn't declare the outfit to be the finest they've ever seen, calling them stupid or unfit to be investing in public companies....My advice would be to run.

There are lots of Investor Relations Rumpelstiltskins out there trying to spin worthless straw into gold so be careful and suspicious.  And pull out a book of old children's fables like those by Aesop and Hans Christian Anderson, you might find some lessons that still apply today.

Are shares of Lithium X Energy "Jumping the Shark"? (LIX.V - LIXXF)

For those unfamiliar with the term "Jumping The Shark" it comes from a TV show called "Happy Days" that aired between 1974 and 1984.  Even if you're under 40 you've probably at least heard of it.

The most popular character on the show was 'The Fonz', a tough guy mechanic with a soft heart and a way with the ladies.  All he had to do was snap his fingers and girls came running.  When he wanted to play a song on the Juke Box he just gave it a rap with a closed fist.  Here's a YouTube video which shows why Fonzie was so cool:

Happy Days was a top rated show.  The most watched episode involved the Fonz jumping garbage cans with his motorcycle.  Nothing lasts forever and after a few seasons ratings started falling.  So the producers decided to try the same ploy again, but instead of jumping garbage cans with his motorcycle, this time Fonzie jumped a shark on waterskis while on vacation in California.

While the show got a temporary boost it didn't last.  Ratings continued falling and the show was eventually cancelled.  And from that time forward the term "Jumping The Shark" has come to signify a last ditch effort that ultimately fails.

So why do I ask if Lithium X Energy is "Jumping The Shark"?

I have started getting email blasts from "The Outsider Club" that are touting an investment in Lithium X (LIX.V or LIXXF OTC).  The author is Nick Hodge and here's what it says about Lithium X at the end of the latest email:  

• It’s gone up several thousand percent in the past six months. And I think it can do it again. It’s putting a project into production in South America, owns the largest lithium land package in Nevada, and has the best management and board I can find in the space.
• It also still trades with a tiny market cap of $100 million.
• If you’d like to see my full report on the lithium sector, what to avoid, and all the details on my tiny top pick… just click this link.
• Call it like you see it,                                                                                                                Nick Hodge

Call it like I see it?  Okay....I will.

Firstly LIX is not up several thousand percent in the past 6 months, that's a falsehood right off the bat Mr. Hodge.  Lithium X put out a PR announcing the commencement of trading of LIX on the Canadian Venture Exchange on November 30th 2015.  The stock initially raised at 15 cents and opened at double that, 30 cents.

For those lucky enough to get in on the initial 15 cent raise that equals an eye popping gain of over 1,300% by my calculations...That's incredible, so why overstate things? It did not go up "several thousand percent"???   Right off the bat that might be enough to send potential investors running if Mr. Hodge's email is their first introduction to this company.  Who would listen to a guy so lacking in basic math skills.

And secondly, while its great to say it could go up several percent more....responsible market professionals do not ignore the risks, and the fact is that LIX investors buying at current levels could also lose some or all of their investment.  I'm not saying LIX will fall signficcantly, merely that it could.

Then there's the bit about putting a project "into production" in South America.  Uhm, not exactly. As per a Press Release put out by the company on July 20th, the company doesn't even have construction permits for pilot ponding facilities.  In fact investors are still waiting for an updated resource estimate on that proposed mine.  Production, if it comes, is still years away.

I don't want to go on too much about email blasting stock promotional outfits, they are what they are. If you're sufficiently intrigued you can research this Outsider Group outfit yourself and see if you can find some penny stock they promoted that actually went on to deliver long term shareholder value....If you do leave a comment, I haven't been able to find one yet.  

That's not to say companies promoted by Outsider Club haven't gone on wild rides.

Stellar Biotechnologies is probably as good an example as any of the penny stocks this Outsider Group has promoted.  SBOT saw its PPS pumped up to a split adjusted (a 1:10 consolidation)  $20+ per share from just $2 - $5 and now its back down under $3....that's 20-50 cents pumped to $2+ adjusting for the reverse split.

Besides, there are other promotional efforts being employed to attract investors to risk money on LIX.V or LIXXF OTC.  Oilprice.com is also playing up the Tesla angle, suggesting that the nascent electric car company is scrambling to lock up as much of the Lithium supply as possible.

Whether its oilprice.com or outsiderclub or any other promotional outfit I strongly suggest reading the disclaimer statements, usually there's a link at the very bottom of the web page.

Now regular readers (the huge multitude of devoted Avoid The Bag fans, both of them) know that I view some promotion as being part and parcel of development stage companies, it comes with the territory.  Cash strapped prospective businesses need to raise capital to execute a business plan. There are a number of options of course, they can raise money privately, attempt to secure bank loans or seek out so called "Angel Investors".

And then of course there's the public markets, and it can be hard for a small company long on dreams but short on capital to get noticed.  So some promotion is to be expected.  

So do I think Lithium X is "jumping the shark"?  I do.

Beyond the promotional effort and email blasting Lithium X is also popping up on Google Ads on a lot of sites I visit.  I assume its because of all the searching for stories on both investing and Lithium that I do. The ads take you Lithium X's website and a recent Press Release. 

For me its that old line about a market needing buyers and sellers  The stock market is ultimately a zero sum game, buyers get shares and sellers get cash.  When I see a lot of activity designed to entice people to buy shares I have to ask myself who the sellers are....and if maybe they're the smart ones.

Call it the canary in the coal mine, or the shoeshine boy analogy.  When I start seeing a stock getting promoted and profiled almost EVERYWHERE....my Spidey Sense starts tingling.  JFK's father Joe was lucky to get out the stock market before the big crash....When asked about it later he claimed he knew it was time to cash out when a kid shining his shoes started suggesting to buy certain stocks.  

Do note though....I'm using the present tense with the verb "jumping".  I do believe that there is likely some more upside from current levels for shares of Lithium X Energy.  As with the shark jump on Happy Days, there was a ratings boost that came from putting Fonzie on water-skis and sending him through the air with Jaws waiting if he failed.  

It would have been easier to write something like this after waiting to see if LIX.V - LIXXF trades significantly lower in the coming weeks and months.  Then I could have said...."back then, in the summer....that's when shares of Lithium X "jumped" the shark"....but that's boring and too easy. Trying to predict what's coming is more fun.

Ultimately and longer term I think somewhere around $2.50 to $3.00 will prove to be a high water mark as dilution in my opinion will play a big part in weighing down the share price. 

Longer term though, based on their properties and management experience....I do actually think they have a chance to make a go of things.  In another two or three years, 2018/2019 if they are able to clear the many hurdles they'll undoubtedly face.....then I think they could bring a working mine or mines into actual production.  In the interim though I expect shares of Lithium X whether traded on the Canadian Venture or in the U.S. OTC....in my opinion its going to be a roller coaster ride. 

And if the company does bring a working mine to production, then I think those who've been buying LIX.V (CDN) for $2+ currently, that they might end up being lucky to just break even.  

Good luck

Ziopharm - What happens when the excitement wears off?

I have been following Ziopharm since March of 2015 when it popped onto a lot of radar screens. After paying the MD Anderson Cancer Center $50 million in stock for a partnership agreement (and another $7.5 million to expedite the deal) the ZIOP symbol started showing up all over message boards and social media sites where public companies are discussed.

We all know what happened of course, after getting up near $15 in 2015 shares of ZIOP cratered, recently trading for less than $5.  That is until today.

The company released its 10Q yesterday (after market close Aug 9th) and conducted a conference call, the transcript for which is available on Seeking Alpha HERE.  Pre-market activity likely got some excited in my opinion, as the PPS climbed back over $5.  Shares traded as high as $5.30 before the open, and when the bell rang at 9:30 the climb continued.  ZIOP quickly jumped as high as $5.48 for a gain over over 12% from the previous day's close of $4.86

Whether you're invested in ZIOP or not (either long or short) this type of activity is instructive I believe.  When companies are burning cash and selling forward looking promise excitement is almost a commodity in of itself.  And Ziopharm has a long history of generating excitement, in tandem with a massive accumulated deficit that is now over $600 million and growing.

Overall ZIOP finished the day in positive territory, closing at $5.14, after retreating from that $5.48 inter-day high.

Retail investors have a reputation for being focused on price, to the exclusion of almost everything else.  If someone shows up on CNBC and starts screaming BUY BUY BUY for a stock, and if it starts climbing....typical retail players get excited and don't even worry about who is selling or why.  

Conference Calls are a great way to drum up buyers, especially with purely speculative money burning companies relying on forward looking promise to attract investors in my opinion. 

I'm not suggesting there weren't solid positives on the CC, there were.  There's some pre-clinical initiatives which I assume will be with mice, and that's good news for the rodent world.  And the company seems to be progressing with its phase I safety trial which clinicaltrials.gov shows as having a "study completion date" of December 2018, or about one year after the company projects its financial resources will run out.

On the financial side there was very little said, but that is something I expect with speculative companies seeking financing.  A Conference Call is about stressing the positives, so I wasn't suprised to see very little discussion of something so mundane and depressing as raising capital.  According to the transcript of the call this is what was said:

"We have cash, we have a cash runway through essentially the end of 2017..." (emphasis mine)

So all in all, at least in the short term, there's plenty to be excited about.  Obviously going forward they're going to be needing to raise cash, but that's in the actual 10Q filing and a lot of retailers can't be bothered to read it I bet.

We shall see what happens if and when the excitement that gave the share price this little bump wears off.  Or was there enough to sustain it for a while?  Like when they made the Anderson announcement at JP Morgan's Healthcare conference.  Personally I don't think so, but that is opinion....an opinion based partly on the lack of significant analyst participation.  

Companies like JUNO and KITE are getting analysts from the JP Morgans, Citibanks, and Goldman Sachs of the street.  Both Juno and Kite had over 10 analysts on their recent calls including those big boys.  Ziopharm on the other hand only had two, from Raymond James and Griffin, which in my view don't have near the profile and reach of the analysts covering the CAR T leaders.  

Lithium Americas - Short Interest Continues to Climb....

Short interest for Lithium Americas isn't huge by any stretch, up to July 31st 2016 its only 1.42% of the total outstanding, or 4,254,140 shares.  Still that represents an increase of 691,631 from the last update of July 15th when the total was 3,562,509 shares.

I sometimes refer to short selling as "artificial dilution".  There are just shy of 299.5 million shares of LAC that have been issued, current up to July 31st.  However there are another 4,254,140 on top of those 299.5 million shares sitting in people's brokerage accounts, because some people have bought shares that don't physically exist.

I want to be perfectly clear on one point here.  I am not one of those commentators who is going to tout a possible short squeeze as a reason for being bullish and to encourage others to buy shares of Lithium Americas.  Why?  Quite simply because short sellers are frequently right, not always, but they have a very good batting average.  Better than longs in my opinion, that's why Hedge Funds are the whales of 'The Street'.   

I do not view short players as evil or "out to destroy shareholder value" as you often see on message boards and investor forums.  For me they are an essential part of the game.  Bears do two vital things, they provide for an orderly market and they improve liquidity. Without short selling the volatility in the markets would be insane, and buyers might find it difficult to locate willing sellers.

Thankfully, (for me) as noted at the beginning, the short position in Lithium Americas is small.  If it were in and around 10% of the OS count or higher, then I would have to reevaluate my position.  But at less than 2% of the total, I view it as noteworthy but not something to worry too much about.

Why noteworthy?

To short any stock a bear needs to have a big bank roll because of margin requirements.  And to short a stock like LAC, (trading at less than one Northern Peso or only about 72 US pennies) not only does a player need deep pockets but also cajones made of near 100% cast iron.

Short interest for LAC has been climbing steadily for months.  Back on March 31st it was just 769,200 shares.  By May 31st it had climbed to over 1.9 million and now it sits at over 4.2 million. And during this time LAC has gone from around 50 cents a share at the end of March to 96 cents currently...nearly doubling.

Bears must be hurting.  

But remember, for a long player holding a stock that has dropped...a paper loss isn't a capital loss until the shares are sold.  And for a short seller a loss on a rising stock isn't a capital loss until the position is covered, or bought back.

Many longs, if they buy 10,000 shares of a stock at a dollar....and if they see it drop to 75 cents, they'll buy another 10,000 to lower their average cost to .875.....And if the price drops further to 50 cents they'll buy another 10,000 shares to  bring their average cost down to 75 cents.  Of course that's just an example but you get the idea, its called averaging down.  If someone is convinced that a company will be a long term winner, and assuming he or she has the capacity to do it....averaging down can be great strategy if the company being invested in succeeds.

Bears can do the same thing, just in reverse.  

Someone who shorted 500,000 shares of LAC at 50 cents, could short another 500,000 at 75 cents and another 500,000 at $1.00.  Now our notional bear would be short a total of 1.5 million shares of LAC at an average selling price of 75 cents.  Those sales would have netted Mr. Bear $1,125,000 but if forced to buy them back at a buck, they would cost him $1.5 million for a loss of $375,000 plus brokerage fees.  But it isn't a loss until he either chooses or is forced to cover.  If he can ride out the rising share price, and if the company he's short on ultimately fails....then he can still be a big winner.

See what I mean about short sellers needing to have deep pockets?  Margin requirements for shorting a penny stock like LAC can be huge.  Yes it trades on Canada's big board TSX and not the riskier Venture, and yes they have the JV with SQM and are a holding in the only Lithium ETF, but its still a penny stock.  And shorting a penny stock can mean margin requirements of as much as 100%.

Let me put that in perspective for you.

Using the previous example of someone who's short 1.5 million shares of LAC at an average selling price of 75 cents CDN.  That means the short seller netted $1,125,000 from the sales.  But if LAC is trading for $1.00 CDN a broker can require the short seller to have $3,000,000 on deposit in a margin account, $1.5 million for the current share value plus an additional 100% on top.  And if LAC climbs to $1.25 then the amount of money in the margin account would have to go up another 25% to $3,750,000 in total....and so it goes.  

Now, it could be that there are long players looking to accumulate LAC who have used short selling as a means to "shake the tree".  Retail investors are notoriously price sensitive, so seeing LAC drop from $1.10 down to 90-95 cents, its reasonable to expect that some likely decided to sell.

But there are many commentators out there who are calling the overall Jr Lithium mining space a bubble.  I do not consider it unreasonable to expect that there might just be a Hedge Fund out there, and maybe more than one, that have decided to play Lithium Americas to the short side.

Canadian Hedge Funds are smaller than their American cousins, but still sources like the Financial Post report many with $100 million or more in assets, and a few with over $1 billion.  Those are very deep pockets.  And if LAC does start moving higher again they may just be able to ride it out in hopes that the longer term bubble thesis proves accurate.   

There are a number of expected events that could drive buy side interest in the coming weeks and months:

• Project update for the Argentinian mine
• An updated Feasibility Study (FS) with more current Li prices
• Updates on the Nevada property
• The start of construction at Cauchari-Olaroz

Anyway we'll see how it all plays out.  I'm a shareholder here so my opinions are not without bias. And with that being said I still consider the risks here to be substantial, with a very real possibility for losses from current levels.  And should the PPS take off causing a Hedge Fund to find its survival threatened?  I won't cry, I don't dislike short players....they're part of the game, and I'm sure they don't cry when retail investors lose money.

Iceberg orders - Why you can't always trust L-II

You've probably heard of an ancient Chinese book called "The Art of War" written by Sun Tzu in the 5th century.  Although  it was designed to explain military strategy its also very popular as a text for how to succeed in the business world.  

A key principle in the book is about deception, here is what it says:

All warfare is based on deception. Hence, when we are able to attack, we must seem unable; when using our forces, we must appear inactive; when we are near, we must make the enemy believe we are far away; when far away, we must make him believe we are near. 

Many view the public markets as a war, a battle between longs and short...dah bulls versus the bears. I also view it as a David and Goliath struggle pitting small retailers against big industry players. A war between the lunch bucket crowd logged into discount brokerage accounts on one side, pitted against an army of market professionals.  And unlike the Biblical account where David slays the giant, in the market game its the Goliaths that usually win.

And one reason they're able to win in my opinion?  Deception.

When a retail player logs in with their discount broker and places a limit order, either a buy or a sell...BING, it pops up on the order book and can be seen on L-II.  Maybe you've checked it yourself. You decide to place a buy order for my favorite fictional stock, ABC which show 10 lots on the bid at $2.00 and 10 lots on the ask for $2.10.  You put in a bid for 10 lots at $2.05 and...BING...you see your 10 lot order pop up on Level II as the highest bid.  

When a Goliath puts an order in however, he has some other options, one of which is an "iceberg" order.

What is an iceberg order?  With a real iceberg floating in the ocean, you can only see a small potion of the ice, most of it is hidden below the water line.  With an iceberg order a large player can have 10 lots showing at the bid at say $2.00, but another 1,000 lots on the bid at the same price, but hidden from view.  

Why would someone want to hide their interest in buying?  Pretty simple and obvious.  The big player doesn't want everyone knowing that they have major interest in a stock.  After all, if the big buyer thinks $2.00 is a good price for ABC and everyone sees a massive order for 1,000 lots (that's 100,0000 shares) on Level II, then those selling might think...."Damn, maybe something is coming, maybe I should hold on...or maybe even buy some more".  

And the same thing works when selling.  Rather than "advertise" that he wants to dump 100,000 shares after ABC has climbed to $10, instead the iceberg is used on the sell side, with only 10 lots showing and the rest hidden.  

If you pay attention to message boards for a stock that's getting a big run you've probably seen messages like:  "Only 10 lots available at $10, once those get taken out this is gonna fly"!!!  It happens all the time....usually in tandem with some bullish news combined with promotion and lots of hype.  

The game is deceptive, but also necessary I would argue, otherwise there wouldn't be fortunes to be made, and of course it follows.....fortunes to be lost.  Its a zero sum game and not everyone can win, some will get shares while others get cash.  And knowing about the deceptive games is still only half the battle, there are so many traps designed to ensnare the naive and greedy that no retailer no matter how good can win all the time.....just try to win more often than you lose and don't be shy about taking profits in my opinion.  

And that goes double when you're dealing with shares in a company that is losing money currently but promising big things down the road.....all too often the road stretches out forever and is littered with freshly printed shares.

Good luck.