short a stock that is halted

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financeguy88
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short a stock that is halted

Post by financeguy88 » Sun Nov 19, 2017 2:37 pm

Long story, but I short sold a high borrow cost stock (was clearly a fraud, ~70% annual borrow cost) and then the stock was halted as the SEC / Nasdaq conduct a review. The stock remains halted but I am still stuck paying borrow cost. It has been halted now for over 6 months. The stock is held at interactive brokers and the interest continues to add up. It is clearly unfair to be stuck paying interest on a fraudulently marked security -- once it is unhalted the stock will presumably fall a lot. I didn't care for the first few months but now it is getting a bit ridiculous.

Does anyone have any experience with this kind of situation? Any suggestions / solutions? Thanks

bberris
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Re: short a stock that is halted

Post by bberris » Sun Nov 19, 2017 6:04 pm

Did you talk to IB? Maybe you can arrange a private purchase to cover, but it sounds problematic. The guy who lent you shares is obviously enjoying this and the high lending fees are probably the reason he bought.

minimalistmarc
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Re: short a stock that is halted

Post by minimalistmarc » Sun Nov 19, 2017 6:07 pm

Probably nothing you can do but sounds like a valuable lesson.

What happens if you are shorting a stock that goes to zero?

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Silly Wabbit
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Re: short a stock that is halted

Post by Silly Wabbit » Sun Nov 19, 2017 6:28 pm

minimalistmarc wrote:
Sun Nov 19, 2017 6:07 pm
Probably nothing you can do but sounds like a valuable lesson.

What happens if you are shorting a stock that goes to zero?
You win?

The stock is worthless, so there's nothing to repay.

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alpenglow
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Re: short a stock that is halted

Post by alpenglow » Mon Nov 20, 2017 8:39 am

Wow. I don't have any advice but I feel your pain. I was caught in halted securities many times as a professional trader, but never for that period of time.

DrGoogle2017
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Re: short a stock that is halted

Post by DrGoogle2017 » Mon Nov 20, 2017 11:22 am

How could the borrow cost be so high? 70%

financeguy88
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Re: short a stock that is halted

Post by financeguy88 » Mon Nov 20, 2017 8:14 pm

DrGoogle2017 wrote:
Mon Nov 20, 2017 11:22 am
How could the borrow cost be so high? 70%
It isn't that uncommon for borrow costs to go really high for a period of time in relatively less liquid securities. It is highly unusual for a security to be halted for more than a few weeks, let alone 6 months, on a US exchange. In asia maybe. I'm not panicking because it is a a relatively small (~50bps psoition) but even still it is a nusaince and costing me money. at least I can write off the interest, I tell myself...

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LadyGeek
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Re: short a stock that is halted

Post by LadyGeek » Mon Nov 20, 2017 9:37 pm

An off-topic comment and reply were removed. As a reminder, see: General Etiquette
We expect this forum to be a place where people can feel comfortable asking questions and where debates and discussions are conducted in civil tones.

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LadyGeek
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Re: short a stock that is halted

Post by LadyGeek » Mon Nov 20, 2017 9:38 pm

The wiki has some background info: Short selling stock
Silly Wabbit wrote:
Sun Nov 19, 2017 6:28 pm
minimalistmarc wrote:
Sun Nov 19, 2017 6:07 pm
Probably nothing you can do but sounds like a valuable lesson.

What happens if you are shorting a stock that goes to zero?
You win?

The stock is worthless, so there's nothing to repay.
This article has some insight: What Happen If Short Stocks Go to Bankruptcy?
To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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