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How To Short The Company Stock

"You're the finance guy. I am really depending on you. This had better work."

the Chief Financial Officer had heard this from the CEO a hundred times. He knew the old man had money problems, but he had no sympathy, considering his own issues. "It'll work. I understand the stock market. Everything is laid out." He jerked his head toward the Chief Operating Officer. "She can stop pacing now."

"I've got a right to be nervous, " the leggy blonde said., "you two ran the company into the ground, and now the only way out is by the bean counter's crazy scheme."

"It's not crazy; it's based on sound stock market principles. The market hates uncertainty. That will work for us." The CFO sounded more confident than he felt. Everything related to Solutions Oriented Specialists seemed to fail. Even the company's initials spelled disaster. Betting against the company seemed like the smartest thing.

The COO stopped pacing a moment. "You said we were going to be betting against the company. What exactly does that mean again?"

"There is a process called short selling, where a person can borrow a stock at today's price and pay it back later at the then current price." The CFO hated having to explain the complicated genius of the market in this basic manner to these novices. "If the price goes up, you lose money, but if it goes down, you can buy it back for less, and you make money.

"As you know from your stock and company stock options, the price of our stock has been going down, along with our earnings. That is part of the reason why we are all broke and in debt up to our ears." The other part being the profligate lifestyle that each led. It isn't likely the rotund, balding, jowly CEO would be able to have a string of mistresses on his charm alone. The plastic surgery the COO had must have cost a bundle. Not to mention the CFO's own drinking and gambling problems.

"So why the big upcoming production? Why just short the stock and wait for it to continue to go down?" Unsaid was the accusation "The same idiots are running it."

"Because you can't count on that. The overall market may go up, and the expression is a rising time lifts all boats. So, even a crappy stock like ours may go up. Plus, the longer we have to wait, the better the chance people may find out we are betting against our own company. I am sure I mentioned that this was unethical, and probably illegal."

The CEO was aroused from this stupor. "Yes, you did, you even recorded it, so you didn't take the fall by yourself. I don't care if it's illegal, as long as it's successful." The other two knew that legality wasn't much of a stumbling block where the CEO was concerned.

"So, the company event, as you like to call it, will cause the stop to go down suddenly?"

"Yes, it's almost a guarantee. Anytime there is a major event like an accounting investigation, a management change, or a disaster impacting the company, the stock sells off, that is, goes down in price. The market perceives any uncertainly about the future of the company as bad news."

The CEO was alert now. "And what would happen if something happened to the whole management team?"

The CFO felt the enthusiasm and responded in kind. "Then the stock would drop huge, maybe by half. Someone who shorted the stock before that would make a ton of money."

The COO joined the giddiness at the money talk. "And that's why we pooled all our money and whatever we could "borrow" from the company and gave it you to short our own company's stock."

"Yes, it's all invested secretly in a short position, spread over a number of brokers to limit suspicion. All waiting for noon today. The stock price was $20 this morning. When it reaches $10, then I have orders in to cover the position, which means to buy it back. When that happens we will be each $5, 000, 000 richer.

OK, it's about time. Let's see it happen on the TV business news." The show returned from a commercial break, and the announcer started with a recap of the Current Stock Prices, but stopped when he was a handed a bulletin. "I have some breaking news. It's being reported that there was an explosion at a chemical plant owned by Solutions Oriented Specialists. The information we are receiving is saying that the explosion was contained, but that it appears the CEO, COO and CFO for the company who were visiting the plant, were caught in the explosion and were killed. We are waiting for confirmation."

The three were all glued to the TV. The CFO spoke first. "They may stop trading the stock for a few minutes, but when it opens again, it will fall like a rock. When we cover our short, we can announce that the initial report was wrong."

After a tense half hour, the TV announcer returned to the sad story of the explosion. "No further update from the chemical plant, but the market has announced that trading will resume in Solutions Oriented Specialists' stock in a few moments. It should show some dramatic moves."

"Here we go, " they cackled, almost in unison.

As the first trades crawled along the bottom of the screen, the faces of the CEO, CFO and COO transformed from glee to disbelief to abject sorrow. they could barely comprehend the words of the announcer. "That's very unusual. With the terrible news of the loss of the entire management team, the stock price is going up! The entire market must think the company will be better off with them gone. It's a good thing they didn't live to see this..."

The End

By Henry Swann - Henry is a freelance writer with hundreds of articles published online on various subjects, including business, sports, travel and culture. His work has appeared on Suite101.com, SeekingAlpha.com and the Ya...  





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