You still don't get it. When they lend out the shares they lock in a price and get paid a fee for the service. They often do this when they think that the SP is over bought and does not reflect their true value of the share. This protects them against downturns while still knowing the share are not lost and will be returned.
Think of it this way. When the SP was over $2 because of the Mercedes episode and you lent out all your shares at $2. You were paid $2 and if the lending fee was 5% got paid another 10c. So you have $2.10 to spend elsewhere. Meanwhile the SP drops to 32c and the shares are returned then you lend them out again at 32c plus a 1.5c fee. So you have another 33.5c to add to the 2.10 for a total return of 2.43.5 for an original $2 share you lent out.
Also you will be fully aware that the shares will again be returned. If the SP trends upwards to $2 again you still own them as they must be returned.
In my example I have you lending twice. Realistically from $2 down to 32c the process of lending out, charging a fee and receiving returned shares could happen several times adding to you bank several times at no risk.
This is why the lending to shorters exists. They care not if the shorter's make a profit or not. They still have an interest in the company eventually succeeding long term as it will add to their kitty. PLS went from over $1 down to 15c and is currently $4.91. Shares lent out at a $1 crashed but that did not concern them and now they have $4.91 shares plus the $1 they received from lending them out. So they are 5.91 ahead plus the fee.
cheers Lies
BRN Price at posting:
32.0¢ Sentiment: None Disclosure: Held
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