Mitsubishi Financial have been buying shares for a cash consideration since 18 Oct 2021.
And they have also been Shorting the shares, but also using the shares for Rehypothecating borrowings.
To be realistic, they probably haven't been Shorting the shares, just lending their shares out for a fee to other entities who may want to Short the shares. But there is also a lot of rehypothecation taking place.
These guys are heavy.
It looks like Mitsubishi Financial is using the shares it owns in SXY to borrow finance from Morgan Stanley, in effect, using the value of SXY shares as collateral, probably now that they have a solid $4.60 valuation.
Morgan Stanley would be able to seize the shares if Mitsubishi does not make the required payments on their borrowings. Therefore, I'd say Mitsubishi expects to get their $4.60 per share and the deal to go through, so they would vote for the takeover. I'm presuming that the rehypothecation is used to support other Mitsubishi Finance trading actions.
Mitsubishi Finance and Morgan Stanley would therefore have a very close financial relationship, and some large financial accounts with each other.
It's important to note, that with rehypothecation, the asset in question (i.e. SXY shares) has been promised to an institution outside of the borrower's original intent (i.e. now promised to POSCO/Gina).
Rehypothecation is often very messy stuff. Rehypothecation was a common practice until 2007, but hedge funds became much more wary about it in the wake of the 2008 financial crisis. Personally, I think it's just another dubious financial vehicle that can be used for problematic financial gains by the rich and powerful.
Hypothecation occurs when an asset is pledged as collateral to secure a loan, without giving up title, possession or ownership rights. Rehypothecation is further link in what should be considered a dubious extended borrowing/financial chain.
Under these circumstances, I'd expect Mitsubishi Financial to vote for the takeover.
Gw
SXY Price at posting:
$4.61 Sentiment: None Disclosure: Held
