After a recent reverse split, SMX (SMX) now trades with roughly 1,050,000 shares outstanding. That tight structure shaped the entire trajectory of its surge from $5 in November to $490 last Friday. Before breaking down the synthetic mechanics behind that move, the fundamentals deserve credit.
SMX has had a transformative 2025. The company expanded across plastics circularity, aerospace metals, textiles, hardware-level supply chain verification, and national authentication platforms. It delivered real commercial progress through six major partnerships. In other words, the business improved, and the market noticed.
But fundamentals alone rarely lift a microcap into triple-digit prices this fast. The behavior of the order flow signals that structural pressure was a major contributor. Retail traders rarely buy 100-share lots once a stock crosses $100, and they almost never buy meaningful size at $200, $300, or $400. Those rarely become lottery wins, for which SMX offered a ticket last week for $5. Price-insensitive buying usually belongs to participants who have no choice.
SMX Attracted Eyes for the Right Reasons
That doesn’t diminish SMX’s operational progress. It simply means the short side likely played a major role in amplifying the move. The volume reinforces that view. SMX traded roughly 3.8 million shares on Friday and about 6.5 million on Thursday. For a one-million-share float, that’s not a retail stampede. If this were purely retail-driven momentum, volume would usually explode. That’s because retail buys, sells, rebuys, sells, chases, buys, sells, etc. It creates a lot of circular volume.
Instead, Thursday and Friday stayed tight and controlled, which matches the behavior of forced buy-ins rather than speculative buying. It’s also likely the short position isn’t fully unwound yet.
Synthetic shorting explains why this unfolded the way it did. Synthetic positions were never the intention of SEC rules. They’re the accidental outcome of a system built on lending revenue, automation, and rehypothecation. Brokers earn interest when they lend shares. They’re allowed to lend the same share multiple times as long as positions remain collateralized. One real share can be lent, re-lent, and lent again. Synthetic supply multiplies. No regulator can realistically monitor thousands of microcaps constantly issuing new shares. Over time, the system drifted far beyond how it was designed to function. Here’s an example in SMX’s case.
The Loophole That Shorts Can Exploit…In This Case, Not
If SMX drew down from its $111 million ELOC and issued, say, 100,000 new shares in December, those shares wouldn’t simply add 100,000 shortable shares. They’d become the seed for several million synthetic short shares because each share can be borrowed and reborrowed repeatedly. That’s how small dilution events create disproportionate downward pressure. But this is where timing becomes everything.
If SMX issued zero new shares in December, which seems to be the intent, the float would stay locked at roughly 1,050,000 shares. With no fresh inventory, no broker can borrow new shares, no new shares can be rehypothecated, and synthetic short positions are exposed with nowhere to hide. When T+2 settlement hits, brokers who can’t deliver real shares are pushed into immediate forced buy-ins.
They can’t delay settlement. They can’t rely on future shares. They can’t avoid the clearing house. The squeeze still happens with zero dilution in December. In fact, it becomes even stronger because nothing weakens the structural pressure. This is how you get the rapid cascade from $20 to $40 to $80 to $200 and eventually $490 as synthetic layers collapse and brokers are forced to buy at rising prices.
What Happens Next Year?
Now consider the January scenario. Assume SMX doesn’t touch the facility at all in December. Then on January 5, the company sells 100,000 new shares. Those shares don’t settle into the float until January 7 or 8. But by January, the December squeeze has already played out. The synthetic short positions have collapsed. The forced buy-ins have already been completed. Shorts who failed to deliver in December already had to buy real shares at elevated prices. They couldn’t wait for potential January dilution. They couldn’t postpone settlement. They had to unwind into the market on the market’s terms.
So when the 100,000 shares settle in January, they don’t rescue December shorts, they don’t unwind December’s price action, they don’t erase the December squeeze, they don’t help brokers who already covered at $200 to $490, and they don’t instantly rebuild synthetic supply.
January dilution, if any, arrives in a clean market, not a pressured one. Rehypothecation takes time. It requires a borrowable supply, a willing broker, calm conditions, and multiple layers of re-lending. Immediately after a forced unwind, none of that exists. This is why delaying dilution until January protects the dilution period itself. The company gets capital with far less dilution than expected, the shorts get no bailout, and the stock’s structure remains intact.
SMX Holds the Cards AND Controls the Deal
With over $100 million available through its new facility, SMX now faces a choice. If it raises money through a structure that prevents share lending, such as placements with institutions that do not lend their inventory, the company can block rehypothecation before it begins.
Shares that cannot be lent cannot multiply into synthetic supply. If SMX times any use of its facility only after synthetic positions have collapsed, the company can add new shares without recreating the pressure that fueled years of downward distortion. The best time to dilute is after the unwind, not during it. Dilution after the collapse doesn’t rescue shorts, doesn’t weaken the pressure that already occurred, and doesn’t immediately rebuild the synthetic machinery. It allows SMX to strengthen its balance sheet, fuel its platform engine, and expand its strategic mission without destabilizing its stock price.
This combination of strategy and timing gives SMX something most microcaps never achieve: control. Control over capital formation, control over borrowing dynamics, and control over the structural forces that usually work against small companies. SMX earned this moment. Now it needs to protect it.
