ms a substantial holder on borrowed shares!, page-16

Zwu

I think I see where you might be getting confused. They state the source of funds is either borrowing or cash. But later in the document they also provide a copy of the securities loan and borrowing agreement as well as the international primebroker agreement with the related hedge fund.

I suspect when they say borrowing or cash as the source of funds this is really from the underlying hedge funds perspective not MS perspective but because the hedge fund is a related party they have to include it in their disclosure. It is a similar reason as to why MS have to lodge a substantial notice for the shares even though they do not effectively own the shares.

When you say MS has a zero exposure....lodging a 48m shares substantial notice and then "shorting" the same amount you are actually correct in a true sense. Their exposure is actually zero, they have bought 48m in the market and then swapped out the exposure to the hedge fund. This swap is the short you refer to.....but it is not actually a shorting action through the market rather it has taken place "off market" through the ISLA agreement with the hedge fund buying on the other side.

So actually you are right!! when you put it that way....they have "shorted" the stock but not by doing any actual selling in market. The transaction trail is as follows..MS buys 48m then shorts 48m and hedge fund buys 48m...net buy is 48m as the hedge fund and MS are seen as related parties.

This is where the confusion comes in and I hope I have cleared it up..