January 14, 2018,

 Interesting if nothing else.

Good Morning,

Some have asked the relevance and context of yesterday’s email. I purposefully didn’t get into the analysis, but please allow me to give some context. When someone naked shorts a stock (in this case, allegedly 2.8 million shares) they are creating artificial supply and creating a supply/demand imbalance, and artificially suppressing a stock price. They are also artificially increasing the float. Our float is 4.6 million shares (as insiders own most of the company), so if the analysis is correct, then the float was increased by more than 50%.

The reason naked shorting is so lucrative is that they are earning interest on the proceeds from the sale. They don’t have to pay interest on the borrowed shares…because they didn’t borrow any shares. They may or may not have a capital charge (probably not). When there is a legal short, when they cover their position the float contracts 2:1 for every share borrowed. However, this doesn’t occur when naked shorted (shame). The float only goes back to 4.6 million shares once the position is covered. That said, there is still a very small float (albeit artificially higher), to which to cover the 2.88 million shares naked shorted.

Please keep in mind that in the long term none of this matters and the company’s fundamentals will dictate share price. It just may help to explain the stock’s activity over the last year, and some of the activity going forward.

I now return you to your regularly scheduled programming.

Best,

Terren

 

Terren PeizerCatasys, Inc

Chairman and CEO
11601 Wilshire Blvd, Suite 1100| Los Angeles, CA 90025
Phone 310.444.4321 | Fax 310.444.4394
Terren@Catasys.com

 

January 13, 2018,

Interesting if nothing else.

Good day All,

I commissioned this study. I have no idea if it’s accurate, but I suspect there is some correlation. We do not endorse this analysis. Naked short selling is illegal under regulation SHO. There is an exemption from regulation SHO if one is a market maker. That said I’m told that Citadel is the largest culprit. They have a massive short micro-cap , long big caps trade on (I believe this is accurate) . It’s not an opinion on CATS, but a macro sector play. Take this with whatever grain of salt you’d like . A lot of people are expecting us to do an equity offering and have a short bias. If all goes according to plan, they would be BADLY mistaken (please see safe harbor language in our releases and filings). With tax loss selling over, the stock has responded nicely. I’m excited for 2018. I believe our time has finally come.

Best,

Terren