short position question?, page-25

I don’t have any specific industry knowledge but my impression on the outstanding short numbers is that they are neither accurate, nor relevant and it doesn’t help your thinking about the share price to track them.

I know if I was to buy a warrant this morning to short a stock as soon as I placed the order the warrant issuer would instantaneously short sell the underlying stock to cover their exposure. So they would have to have a stock lending agreement in place with large fund managers holding the stock to do this and that the shares covered by that agreement would need to be set aside in some way to be on call. Similarly if you read the Appendix 3A (I think) notices from major holders of stocks where they have to report their dealings they will list the securities lending agreements they have with various parties.

So if the whole industry facilitates short selling by creating securities lending arrangements between parties, at what point are these arrangements reported to the ASX?. At the time the stock is actually sold, or is it when the stock lending contracts are put in place and the shares reserved in case a short position is needed? It could be that a whole lot of short-selling agreements covering quantum’s of stocks on call are reported to the ASX without any of those shares actually being borrowed and sold and needing to be covered.

It’s also not clear whether reported short selling is audited or verified in some other way or whether it’s just whatever the funds tell the ASX whenever they get round to telling them.

I don’t know the answers but I expect that at all future price levels in Lynas there will be large amounts of outstanding shorts listed. Whatever, it’s not relevant to your trading and I would just ignore it.