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Ann: Strategic Sale of Shares, page-79

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McQuade

1,490 Posts.

508

07/10/19

09:14

Post #: 40751456
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Originally posted by edshann: ↑

I disagree as it can make sense in the medium term. They are trying to make money, but at the short term cost of depressing the price. It is rational.

The owner of the shares makes money from the fee and thinks the stock will eventually rise, while the shorter thinks it will fall further. The owner is earning a fee in the meantime.

It makes perfect sense, though as you say it can drive the share price lower in the short run. The owner thinks it will recover and still owns the share, while the shorter thinks it will fall further and he can buy it back even cheaper.

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My original response was to a comment that the buyer then shorts the stock to get the cost down. Which is illogical/ridiculous.

Institutional clients do enter stock lending arrangements on their portfolio for a fee. Very common. But a completely separate discussion.

PET Price at posting: $1.25 Sentiment: Hold Disclosure: Held
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