ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Tuesday, October 1, 1996 TAG: 9610010053
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
Optical Cable Corp. has asked its shareholders whether the company should move its stock listing from the Nasdaq stock market to the New York Stock Exchange, a move prompted by an increase in "short-selling" of its shares.
Robert Kopstein, president of the Roanoke County fiber-optic cable maker, has charged that certain short-sellers, investors who also regularly buy and sell large blocks of the company's stock, are manipulating the stock's price.
The manipulation, he said, both drives down the price and scares off potential buyers of the stock.
Short-selling of the company's stock, he charged, hurts long-term shareholders by both reducing the value of their investment and eliminating buyers for their shares.
Short-selling is a technique in which an investor sells stock that he doesn't yet own. The investor gambles that the stock's price will fall, meaning he can purchase it at a cheaper price in the future and, thus, make a profit from the two transactions. If the price of the stock goes up instead, the investor loses money.
To fill the order of the person to whom the stock is sold in a short-selling transaction, the initial investor borrows shares from a broker, who may take them from another customer's account. It is this borrowed stock that the short-seller ultimately must cover.
"We shall do everything in our power to set up a battle front against this type of activity," Kopstein said.
Kopstein said the rules of the Nasdaq exchange allow short-selling by stock traders while the activity is prohibited by the New York Stock Exchange.
Optical Cable last Friday asked shareholders whether they want the company to move its stock listing to the New York Stock Exchange. Virtually all who have responded so far have supported a move, Kopstein said. The company plans to announce the results of the poll on Friday, he said.
Optical Cable's stock was first offered to the public earlier this year and the fact that only 2.7 million shares are currently being traded make it more vulnerable to short sellers seeking to manipulate its price. However, the company has no current plans to increase the number of shares available for public trading.
The number of shares being sold in short-selling moves increased from 725,889 in August to 755,318 at the end of September or 28.5 percent of the total shares available for public trades, the company said. A large majority of the company's shares are owned personally by Kopstein and are not publicly traded.
Optical Cable stock closed Monday at $16 a share, rising 621/2 cents on trading of about 62,300 shares.
Nasdaq is looking into Optical Cable's complaints against the short-selling practices and expects to have a better understanding of what is going on with the company's stock in about three weeks, Kopstein said Monday.
Stephan Beauchesne, a spokesman for Nasdaq in Washington, said he couldn't comment about any specific complaints lodged by Optical Cable but said any allegations of misconduct by traders should be investigated.
Kopstein said that shareholders can make it tough for the short-sellers by making sure their own brokers do not allow Optical Cable stock to be loaned to short-sellers, who need borrowed shares in order to complete their deals.
Kopstein has also asked the Securities and Exchange Commission to look into the alleged stock manipulation.
LENGTH: Medium: 65 linesby CNB