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oberte

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05/06/24

12:08

Post #: 74173233
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Originally posted by BobF: ↑

I am willing to stand corrected if required, as I have never actually performed the transaction. And I am not likely to do so to learn the contractual details first hand.

But however the contractual agreement is worded my understanding of the net result is that the 'loaner' agrees to 'transfer control and ownership' of a bunch of shares to the 'borrower' for a period, and the 'borrower' is obliged to return the same number of them to the original 'owner / loaner' on a set date or as otherwise agreed. For this to occur some values are being transferred between 'borrower' and 'loaner', or do you think I have that wrong as well? My understanding is that the loaner profits from loaning the shares out, and the borrower pays for the privilege of having them to play with. Whether the transaction is considered to be a sale or not is somewhat immaterial. Control and ability to vote and sell is commonly understood to be ownership.

It costs the loaner none of the original price he paid for the share to get full control of it back. He just gets the share back under his own name. That's the deal I think. I simply implied that the 'contract' between the parties amounted to a 'cost neutral sale' transacted at the same price between the parties as the borrower effectively 'paid' the loaner for the share when he took control of it. Even if this is a fiction it still fairly describes the arrangement I think. If the shorter sells the shares he loses control of them entirely, they are gone. That proves his ownership of them. The original owner / loaner cannot go to the new buyer and say "Hey this guy had no legal right to sell these shares to you, they were and are mine, so give them back to me." Nope. They are gone! And when or if they get called in by the loaner the borrower has has to go out and buy more, irrespective of the price he has to pay for them. And if he pays more for the shares he then has to hand back then that is at his loss. It's the shares themselves that are transferred, not the value of them at any of the times of the transactions.

None of this alters the fact that the borrower 'acquires control' of the shares purely with the intention of wresting some value from those whom he can spook into selling their own shares at a lower price than that which he asks for his 'borrowed' shares when he offered them for sale - yes genuinely for sale. He sells the shares cheaply in order to persuade others to do the same. It's just a game of musical chairs, in which he has multiple advantages. These people are just vampires. It's the ordinary punters that get sucked yet again.

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it's like if I rent you my Porsche and you go out and trash it then give it back - it's still a Porsche just worth a lot less!

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Running discussion on SP, page-8154

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Running discussion on SP, page-8154

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