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According to the NASDAQ website ( as of July 15 there were 18,335,854 shares of Sirius Satellite Radio sold short. This represents almost 24% of the total 76,717,000 shares outstanding, and it would take short sellers 17.6 days to cover these shorts based upon an average daily number of shares traded equal to 1,041,908 shares. Can you imagine the extent of the upward price pressure when these short sellers attempt to close out their positions?

To better evaluate this, I thought it would be worthwhile trying to gauge the price levels at which these short sellers sold the stock, since a recovery approaching those price levels would probably accelerate their attempts to buy back their shares. Toward this end, it should be helpful to note that there were 10,818,533 shares sold short as of December 14, 2001 when Sirius stock was valued at $6.75, which means that an additional 7,517,321 shares were sold short during the current year. This level jumped by 3,358,976 shares to 14,177,509 shares by Jan 25, 2002 when the price of Sirius stock was at $7.85 per share, ie., close to its peak for the year. The short interest level then jumped by an additional 2,543,946 shares to 16,721,455 shares on February 15, when the price of Sirius stock was at $5.59 per share.

Since the price of Sirius stock has declined pretty steadily since February 15, what this data suggests is that an additional 1,614,399 shares were sold short after February 15 at prices at or below $5.59 per share. A recovery in Sirius stock approaching this level could, therefore, spur a wave of buying by short sellers anxious to cover their short positions in order to avoid unlimited losses. If that, in turn, was to drive the stock price up to a level approaching the $7.85 price at or below which an additional 2,543,946 shares were sold short this year, this could spur an additional wave of buying by short sellers anxious to cover their shorts at or below $7.85 per share in order to avoid unlimited losses. Following this line of thought, this process could repeat itself over and over as excess demand for Sirius shares induced by short sellers trying to cover their short positions pressured short sellers who sold their shares at higher prices to follow suit. However, it is likely that investors who are currently long the stock would probably take profits somewhere along the way, so the additional supply of stock that they make available could mitigate some of the upward price pressure placed upon the stock by short sale covering. But, armed with this knowledge, I doubt that many investors who are currently long Sirius shares would be willing to sell shares at their current depressed levels, and by staying the course, their belief in the profit potential of their investment in Sirius stock could very well be a self-fulfilling prophecy. By holding their shares, they could create a short squeeze, which is a much more frightening term to short sellers than the term "bankruptcy" is to long buyers, especially when the whole "bankruptcy" scare was overdone. If they want my shares, they'll have to pay a lot more for them than simply the cost of bricks and mortars.

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