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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Gokhan Gezmisoglu who wrote (7859)	4/25/1998 11:59:00 PM
From: Bald Man from Mars	Respond to of 18691

Mr. Gokhan: I don't think any of your questions is a shorter's concern. You borrowed the shares you want to short and buy it back when and if it goes down ... Isn't that all there is to shorting ...

To: Gokhan Gezmisoglu who wrote (7859)	4/26/1998 11:45:00 AM
From: Mama Bear	Read Replies (1) \| Respond to of 18691

I'll take a shot: >>>1) Company A has now a float of 110 shares so the liquidity has increased actually. Right or wrong?<<< A has a float of 100 shares. 100+(10-10)=100 However, there is a temporary position of 110 long shares. >>>2) Company A has a good year and no use for cash so they declare $1 dividend. On the Distribution date, Company pays out $100. Now we have 110 shares out there and only $100 to be shared. Mr Short ends up paying $10 to Mr Bull for the dividends. Right or wrong?<<< Correct, the company is only liable for $100 in dividends, it's why it's preferable to short companies that pay no dividend. >>>3) Mr Bull does not know (and does not have to know) that he had been paid by Mr Short. As far as he is concerned, he was paid by Company A. Right or wrong?<<< Probably correct, I suppose Mr. Bull could theoretically find out if he wanted. But dead presidents are dead presidents, so it's not very likely he'd care. >>>4) Company A has to decide on a matter and needs a shareholder vote. Do I have 10 shares worth of votes? Does Mr Bull have 10 shares worth of vote? Who gets to vote? Now we know that I was keeping my shares in a margin account (and not in a cash account so they were lent out) Did I lose my right to vote when I decided to keep my shares in a margin account? <<< Shares in a margin account are held in "Street" name, and the voting rights actually belong to the brokerage house. Read the fine print on the back of a proxy statement, you'll find this to be true. The common practice is to mail you a proxy form and to vote your shares according to your wishes. Voting in a company matter is one area of shorting that I am a little hazy on, it would seem on the face of it that there are 110 shares entitled to vote. I think this mainly takes care of itself, because there are enough folks who just don't care. I recently got a proxy form from a company that I held overnight. It just happened to make me a shareholder of record. I tossed the proxy because I really didn't care one way or the other. This allowed at least 1000 shares held short to even out. >>>5) Assuming I lost my rights to vote when I decided to keep my shares in a margin account, did Mr Bull also loses his right to vote when he keeps his shares in a margin account? What if his shares are in a margin account and they are not lent to a short seller yet? He has the right to vote because he was lucky or as soon as you put your shares in a margin account, do you lose your right to vote?<<< If what you're worried about is getting to vote, you do get a proxy statement for shares that you own in a margin account. >>>6) I decide to move my shares in a cash account so Datek needs to supply me my 10 shares. Datek has another customer who is 10 shares long in a margin account (can be even Mr Bull), they get those shares and give them to me. Right or wrong?<<< Since you are long, the brokerage that you were with before would transfer the actual shares you own from their street account to Datek's. After you move to Datek Datek will have 20 shares long in "street name". You supply the shares to Datek, not vice versa. >>>7) Say Datek does not have another customer who is long in margin account. Can they go to E*Trade and ask for 10 shares or do they have to ask Mr. Short to supply the 10 shares he is short?<<< You supply the shares you are long to Datek when you move your long position into their account. If Mr. Bull moves his 10 shares into a cash account, Datek could call Mr. Short and force him to cover. Datek could also borrow the shares from another customer, or even another brokerage. There is also a thread on SI called "Shorting stocks: Mechanical aspects" at: Subject 15252 You're questions might be better asked and answered there. Hope this helps, Barb