Ann: Trading Halt, page-168

You made me go look at the change in shares on issue and change in short interest around capital raisings in the last ten years or so for MSB. There's some truth to short interest declining at the same time as a capital raising, though it is only partial. For example, prior to the last issuance, SOI increased by about 77m or something, while short interest fell around 20m. The one before that, about 87m shares issued while short interest declined around 30m. So I agree that it's fair to say shorters get the opportunity to cover, though it is not clear from the aggregated data that they actually get allocated in the raising (you can't tell). Shorters may take advantage of lower prices after a raising to cover in the market or decide that the company's finances have improved and so look for something else to short. Interesting one to look at.

Another weird feature of the timing is that MSB was dropped from MSCI smallcap indexes and added to MSCI microcap indexes. There's more money managed to smallcap than microcap globally, so I would expect net selling from passive investors benchmarked to smallcap to have occurred yesterday. Liquidity providers turn up to facilitate that, by a combination of shorting ahead of the action and covering; and by selling the acquired shares after the rebalance is complete. They'd be none too happy with the stock going into halt for a rights issue if they are stuck with the stock. The registry might a bit annoyed too, because reconciling entitlements will be much more complicated with all the trades that took place - they are unsettled(!). Lots of useful work for capital markets people...