short sells up, page-33

OK,it works like this.

1. You borrow the stock. This involves the stock being transferred into your name and you pay a fee to the lender.

2a. If you then sell the stock, you are short selling as you have to return the stock at some stage. As you have sold the stock you are not entitled to any rights. The person to whom you sold the shares is entitled to the rights.

2b. If you do not sell the stock, you are not short selling. As you have not sold the stock you are entitled to the rights.

3. At some stage you return the shares to the lender. The stock lending contract will include a clause that includes an amount of compensation payable to the lender for the rights issue.

i could not find a quick internet reference for this, but this is how it works