Ann: MSB Launches Entitlement Offer and Placement, page-118

Hi Lopez,

The hedge fund take stock in the placement or institutional entitlement shortfall and deliver it back to the stock lender. This closes out their short position. It's very standard practice. If you look on shortman after every placement settlement there is a drop in the outstanding shorts.....that's what's happened.

Companies sometime try and keep them out, but in a placement like this I would guess that they need every bidder they can find.

Even if they can't with an enittlement issue like this they are most likely to trade close to terms as retail investors sell stock to fund the entitlement. So if they can't get stock in the placement they will easily cover the position in the market at a lot lower than it last traded.