Investor's Champion Blog
Provides refreshingly forthright, independent comment on predominantly small cap companies and specialist investment funds. Informed opinion, based on first-hand research, but pulls no punches in exposing management weaknesses.

Risk vs reward -what's the point in trying to short a tiddler?

I see that great hindsight investor, ‘Evil Knievil’, or whatever his name is, was at it again today with some of his great short calls.

Apparently he shorted shares in Fishworks just over a week ago ‘smelling that something wasn’t right’. Given the illiquidity of Fishworks shares I’m amazed he is able to short the stock at all and if he does I can’t see how he can do it to any material size. If one also applies a high cost of borrowing and a huge spread (c14%) the risk reward ratio would appear to make the shorting of Fishworks shares (or indeed any other micro cap minnow) to any real material level a rather fool hardy exercise.

I'm almost inclined to think that he would only put on a trade of this nature if he was more or less absolutely certain of a positive outcome within a very short period-somewhat questionable!


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