Selling Short – An iConsumer Mystery and Education

By: Robert Grosshandler | September 5, 2019

Today I noticed something brand new in the OTC Markets dashboard for RWRDP. “Short Interest”.

Selling Short / Short Selling” is basically the reverse of what we’re all (well, apparently almost all) trying to do. We’re trying to “buy low, sell high”. First buy, THEN sell. Short sellers are trying to “sell high, buy low”. First sell, THEN buy.

It’s a bet that the stock price is too high and will go down. It’s a very, very risky bet, and one I had thought wasn’t possible, at least not yet, for RWRDP. Wrong. After some digging, and talking to the experts who said “no way”, and FINRA, and the OTC Market folks, I learned that between the end of July and mid-August, one or more people had sold a total of 86 shares that they didn’t own.

Question Mark

Selling stock you don’t own seems counter-intuitive. It involved borrowing the stock, and paying interest, and other stuff that requires a more advanced course in investing than I’m qualified to teach. The short selling link above leads to way more information on the machinations involved.

Here’s why it is so risky: those people potentially have UNLIMITED downside risk. They could lose a lot of money. For “just” 86 shares. A mystery. What was the motivation??

Short selling has its place. It helps to make markets more efficient. There are ways to hedge the bet in an efficient market, with a more mature security than RWRDP. But all of the attributes that make iConsumer’s stock volatile and illiquid make it inappropriate, so I thought, to sell short. Obviously somebody disagrees.

Tesla Logo

Typically, the people who own a lot of a company (like me in the case of iConsumer) hate short sellers. A great recent example is Elon Musk and the shares of Tesla. I figured short sellers just come with the territory, though I didn’t expect to be in that territory for several more years.

I think I’m sort of pleased that this happened earlier than expected. It’s a little like having your child ride his or her bike for the first time. Proud and scared. Especially if the kid (or your company) is still a startup!

Time to get more educated, I think.