Originally Posted by
The Juice
You can buy a crap load of Mesa at the low price and it will cause the price to rise a lot in one day. Now that you are sitting on all those shares you can "borrow" more shares of Mesa from a broker on a short position. Now you are holding purchased shares and "borrowed" shares from a broker that will need to be repaid at the sale price + a commission. Since the stock is still cheap and volatile you can dump all of your purchased shares to cause the stock to dive bomb and be able to cover your shorts with a nice profit.
Unless the rules have changed since I was in the business, to borrow against that long position, it has to be a marginable security as defined by Reg T of the Federal Reserve. Penny stocks are not marginable and if you find a broker that is willing to lend you money against it, you'd better run cause he doesn't send letters to collect on money he's owed ---- if you follow my drift. Remember --- the only collateral the broker has to cover his loan to you is the stuff you own. If you happen to have a nice diversified portfolio and are dabbling around in penny stocks, sure he'll let you borrow to buy more penny stock --- but ---- it's the other stocks that are securing the loan and they are at risk when you start facing margin calls.