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Strategies & Market Trends : Shorting stocks: Mechanical aspects -- Ignore unavailable to you. Want to Upgrade?

To: Anaxagoras who wrote (87)	8/3/1998 4:50:00 PM
From: Ken Brown	Read Replies (1) \| Respond to of 172

Anaxagora, simply buy the appropriate number of rights I have no clue how they are trading. It's very possible they're going to show up in my account after settlement date of the, um, distribution (?). But, I haven't been able to find a symbol for them, so I wouldn't know how to buy them! Ken

To: Anaxagoras who wrote (87)	8/5/1998 3:35:00 AM
From: 246810	Respond to of 172

John borrowed the stock from someone who doesn't know it is gone and thinks he is going to get rights. He sold it to someone who doesn't know it was borrowed and who expects to get rights. The company is going to issue only one set of rights to whoever owns that stock on the effective date. So if John buys to cover before the effective date and repays the loan, the rights will be issued with no liability to John. If John covers after the effective date, he needs some rights to deliver back with the stock. If John stays short and the lender wants to exercise the rights, John will have to deliver the stock at the exercise price, maybe. If John stays short and the lender fails to exercise the rights, John is home free, maybe. The catch to this whole thing is there is no one-to-one correspondence between who loaned the stock and who wants to exercise the rights. Therefore, the clearing house would argue "the rights were exercised, deliver." And, John would argue, "not everyone exercised his rights, my lender failed to execute. I won't deliver." 246810