Australia's largest stock trading and investment forum Australia's #1 stock forum

GXY

Click for more information

0.00%

$5.28 galaxy resources limited

They make money lending their shares confident that the price...

First 793 Last

Share
Profile

Follow
Subs

4,845 Posts.

1558

27/08/18

21:19

Post #: 35217839
Share

Originally posted by steelfabric ↑

While we all, mostly, have a healthy distain for the shorters, has anybody considered the shorter's partner, the lender.

Why would a share holder lend their shares to somebody who is betting that the share price will go down. And at what point does the lender call the shares back.

Maybe the lender sees a good long-term future for the company and so doesn't mind lending a few shares out in the short term. The lender will make a little money from whatever rate they charge for the loan, and they get the shares back at some point, so there's no real downside.

Maybe the lender owns the shares on behalf of somebody else, like in a support fund. Again no big deal to loan out a few and make a bit of money on the side.

I'm sure there are plenty of other scenarios where a lender can oblige a shorter.

But, what happens when the shorters are deliberately trying to force the share price down by excessive selling. What roll does the lender play here.

If the lender is an innocent party they will see the share price go down beyond what they think is reasonable fair value, then what do they do. Call the shares back, I'd guess, and in doing so will raise the share price just a bit. Then the lender might sell some or all their portfolio for fear the price will fall further, which will achieve exactly that, a fall. Big win for the shorters. Kind of like a stop-loss hunt on steroids.

And then what if the lender is not so innocent and wants the price to decline. This is where I think it gets real murky and there are too many possibility to cover. One would assume that a lender with a bundle of shares would only lend them out for the purposes of seeing the price and their portfolio drop in value if there was a bigger gain to be made when the loan is part of a much larger transaction designed to achieve some higher end goal.

With this in mind, we have our favourite shorting whipping boy borrowing shares from lots and lots of lenders, evidenced by some recent becoming/ceasing substantial ann's, some lenders having rather large holdings. And there's no doubt that our favourite whipping boy is not the only large-scale shorter out there.

Putting aside shorter motives, what are the motives of the lenders? Are they happy-long-term'ers or proxy-owners who don't mind lending share, innocent's or malevolents? I can't work it out.

Expand

They make money lending their shares confident that the price will rise again.
or
They make the same money lending AND get another bite at low prices.
or
They are lending out their clients shares... in which case they are just trying to make money from something they don't actually own and it doesn't matter if the price drops or not.

You are right though. Why would they lend out just to assist in the destruction of their own holding? It isn't logical. Unless they want one of the benefits above. Take Blackrock for instance. They lent out their shares, but didn't change their holding in the last 3 months...

To that end, hopefully Blackrock now take full advantage and get buying at these low prices.

Last edited by Subs: 27/08/18

GXY Price at posting: $2.77 Sentiment: Buy Disclosure: Held
5 Upvote

2 Great analysis

Reply

Top Stories

MGU

New results confirm Buena Vista's iron grades potential

Trimmed CPI figure provokes market jump of 1%, but inflation pressures remain a reality

MRC

Mineral Commodities to shut down Tormin mineral sands project as oil spill contaminates beach

KOB

Koba, formerly a cobalt player, gears up to become newest explorer in the uranium state: South Australia

1CG

One Click Group jumps 4% after ending quarter with $2.4M in cash; $1M in revenue and 150K+ users on board

There are more pages in this discussion • 399 more messages in this thread...

First 793 Last

Add GXY (ASX) to my watchlist