Shorting stocks: Mechanical aspects Message Board

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Strategies & Market Trends : Shorting stocks: Mechanical aspects

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To: Q. who wrote (170)	6/12/1999 3:59:00 PM
From: dumbmoney	of 172

Has anyone shorted a stock with a rights offering? I am looking at ICOGF which has a rights offering as follows: ------- Shareholders of record on June 3, 1999 [this was later extended to June 24], will be granted one non-transferable right for each ordinary share owned. Each right entitles the holder to purchase one ordinary share and to subscribe for additional ordinary shares at the subscription price. Rights may be exercised in advance starting on May 19, 1999, but not later than June 3, 1999. ------- The offering price is $5 and the market price is around $5 3/4. It seems like there should be a way to arbitrage the difference, but I'm not sure how. Here's the rub: by shorting the stock, it seems I am potentially liable for an indeterminate number of shares at $5. In other words, if I try to perform an arbitrage by shorting the stock and subscribing for a like number of shares, I may end up short a boatload of shares at $5, depending on what other shareholders do. Ideas anyone?

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