TiVo Added to the Nasdaq “Threshold” List

Today news is out via Bloomberg that on March 4th TiVo was added to the Nasdaq “threshold” list. It sounds like a complicated thing but probably is best explained in average folk terms as a heck of a lot of people don’t think the company looks very good as an investment opportunity in either the short or possibly long run and hence are selling TiVo shares that they don’t even own — a risky proposition.

In technical jargon:

“Rule 203 also imposes additional requirements on designated “threshold securities.” Rule 203 defines a threshold security to mean an equity security for which there is an aggregate fail to deliver position for five consecutive settlement days at a registered clearing agency of 10,000 shares or more and that is equal to at least 0.5% of the issue’s total shares outstanding.

Where a clearing agency participant has a fail to deliver position in threshold securities that persists for ten consecutive days after settlement, the participant must take action to close out the position. Until the position is closed out, the participant, and any broker-dealer for which it clears transactions, may not effect further short sales in the particular threshold security without borrowing or entering into a bona fide arrangement to borrow the security.”

Mark Cuban recently did a whole series on shorting stocks and addressed some of the new restrictions that the market regulators have put on how you can short stocks.

It’s not like we haven’t been aware of TiVo’s recent woes. On the upside for the company it may be harder to short the stock going forward and of course if the company does survive, all those shorts will most likely have to be covered and bought back at some point. Then again, if the company goes to zero and you never close out your short position it’s the equivalent of a tax-free investment gain.

At present about 18.5% of TiVo’s available float stock has been sold short. If you compare that to a company like Microsoft, they have less than 1% of their shares sold short. Of course if you look at a company like Netflix, which has been on the threshold list for 39 consecutive days now, they have about 35.5% of their available float currently shorted.

Needless to say you probably won’t be seeing a press release from the company out on this news today. The company’s analyst conference call takes place later this week. Should be interesting to see what management has to say about their company.

By way of disclosure I don’t own TiVo stock today — nor have I ever owned it. And I’m not short TiVo stock either. In fact, I’ve never shorted a stock in my entire life — don’t have the stomach for it. I do own a little Microsoft stock but it’s no more than you’d find in most people’s standard diversified portfolio.

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