Postmortem Analysis: How LICN Was Shorted on 6-Dec-2024
On December 6, LICN experienced a highly orchestrated short-selling ambush, resulting in an unprecedented price collapse within a single hour. Below is a detailed breakdown of how this event unfolded and its impact:
Unusual Volume Activity
1. Low Average Trading Volume: LICN typically experiences low trading volume, averaging under half a million shares daily, occasionally spiking to 1-3 million shares.
2. Unprecedented Dump at 10:14 AM: At 10:14 AM on December 6, a massive sell order of 1.8 million shares was executed within 4 minutes. This volume represents a nearly 200x increase compared to the normal volume of approximately 10K shares per minute.
3. Immediate Price Impact: This initial selloff drove the stock price from $2.10 to $1.60, triggering panic selling among other investors.
4. Second Wave of Selling: Following the initial dump, an additional 0.5 million shares were sold, further driving the price down to $0.80. Within just one hour, LICN’s share price had plunged by 85%, wiping out significant market value.
The Short Strategy
• Shares Used: Approximately 2.5 million shares, or 10% of LICN’s free float, were strategically deployed to create downward momentum. This aggressive selling not only triggered automatic stop-loss orders but also induced fear-driven selling by retail investors.
• Buyback to Cover: Once the price hit rock bottom at $0.20-0.30, shorts began buying back shares at a significantly lower price to cover their positions, locking in an estimated $4-5 million profit in less than an hour.
• Execution: The operation was a textbook example of a calculated ambush. The shorts took advantage of LICN’s low average trading volume and thin order book to manipulate the price with minimal capital relative to the potential gains.
Impact on LICN
• Fundamental Strength: Despite this orchestrated attack, LICN remains a fundamentally sound company. Its financial health and prospects have not materially changed; rather, this event was purely a market manipulation.
• Market Sentiment: The sudden and sharp decline in price has shaken investor confidence, making it crucial for the company to take immediate steps to restore trust.
Suggestions for LICN’s CFO
1. Stock Buyback Program:
• Announce a share repurchase program to absorb selling pressure and signal confidence in the company’s value.
• A targeted buyback of 5-10% of the float can stabilize the stock price and restore investor sentiment.
2. Public Disclosure and Transparency:
• Issue a statement addressing the short attack and reaffirm the company’s financial strength and long-term prospects.
• Highlight key metrics that demonstrate the company’s value to attract long-term institutional investors.
3. Increase Institutional Support:
• Work to attract institutional investors who can provide stability to the stock by holding large positions over time.
• Consider reaching out to funds focused on undervalued small-cap companies.
4. Monitor Short Interest:
• Track short interest data and communicate regularly with investors about unusual market activity.
• Engage with regulators if any illegal market manipulation is suspected.
5. Investor Relations Campaign:
• Launch a campaign to educate current and potential investors about LICN’s business fundamentals and growth opportunities.
• Host investor calls and participate in conferences to rebuild trust.
6. Explore Strategic Partnerships:
• Announce new partnerships or collaborations to showcase operational progress and growth potential, helping to counteract negative market sentiment.
Conclusion
The December 6 event was a calculated and deliberate short-selling ambush, exploiting LICN’s low trading volume and thin float to drive prices down artificially. While the company’s fundamentals remain strong, the attack underscores the importance of proactive measures to stabilize the stock price and restore investor confidence. A combination of stock buybacks, increased institutional support, and effective communication with stakeholders can help LICN recover and thrive in the long term.
Unusual Volume Activity
1. Low Average Trading Volume: LICN typically experiences low trading volume, averaging under half a million shares daily, occasionally spiking to 1-3 million shares.
2. Unprecedented Dump at 10:14 AM: At 10:14 AM on December 6, a massive sell order of 1.8 million shares was executed within 4 minutes. This volume represents a nearly 200x increase compared to the normal volume of approximately 10K shares per minute.
3. Immediate Price Impact: This initial selloff drove the stock price from $2.10 to $1.60, triggering panic selling among other investors.
4. Second Wave of Selling: Following the initial dump, an additional 0.5 million shares were sold, further driving the price down to $0.80. Within just one hour, LICN’s share price had plunged by 85%, wiping out significant market value.
The Short Strategy
• Shares Used: Approximately 2.5 million shares, or 10% of LICN’s free float, were strategically deployed to create downward momentum. This aggressive selling not only triggered automatic stop-loss orders but also induced fear-driven selling by retail investors.
• Buyback to Cover: Once the price hit rock bottom at $0.20-0.30, shorts began buying back shares at a significantly lower price to cover their positions, locking in an estimated $4-5 million profit in less than an hour.
• Execution: The operation was a textbook example of a calculated ambush. The shorts took advantage of LICN’s low average trading volume and thin order book to manipulate the price with minimal capital relative to the potential gains.
Impact on LICN
• Fundamental Strength: Despite this orchestrated attack, LICN remains a fundamentally sound company. Its financial health and prospects have not materially changed; rather, this event was purely a market manipulation.
• Market Sentiment: The sudden and sharp decline in price has shaken investor confidence, making it crucial for the company to take immediate steps to restore trust.
Suggestions for LICN’s CFO
1. Stock Buyback Program:
• Announce a share repurchase program to absorb selling pressure and signal confidence in the company’s value.
• A targeted buyback of 5-10% of the float can stabilize the stock price and restore investor sentiment.
2. Public Disclosure and Transparency:
• Issue a statement addressing the short attack and reaffirm the company’s financial strength and long-term prospects.
• Highlight key metrics that demonstrate the company’s value to attract long-term institutional investors.
3. Increase Institutional Support:
• Work to attract institutional investors who can provide stability to the stock by holding large positions over time.
• Consider reaching out to funds focused on undervalued small-cap companies.
4. Monitor Short Interest:
• Track short interest data and communicate regularly with investors about unusual market activity.
• Engage with regulators if any illegal market manipulation is suspected.
5. Investor Relations Campaign:
• Launch a campaign to educate current and potential investors about LICN’s business fundamentals and growth opportunities.
• Host investor calls and participate in conferences to rebuild trust.
6. Explore Strategic Partnerships:
• Announce new partnerships or collaborations to showcase operational progress and growth potential, helping to counteract negative market sentiment.
Conclusion
The December 6 event was a calculated and deliberate short-selling ambush, exploiting LICN’s low trading volume and thin float to drive prices down artificially. While the company’s fundamentals remain strong, the attack underscores the importance of proactive measures to stabilize the stock price and restore investor confidence. A combination of stock buybacks, increased institutional support, and effective communication with stakeholders can help LICN recover and thrive in the long term.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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