On the one hand, of course the borrower doesn't get a dividend because they have sold the shares. The new owner gets the dividend. But most short contracts require the borrower to pay an amount equal to the dividend to the lender. Presumably the borrower would also have to pay the franking credit amount because they can't deliver an actual franking credit.
On the other hand, the lender loses their voting rights because those have now passed through the borrower (who has now sold the shares) to the new owner. There is no way that the borrower can deliver voting rights to the lender. This is a risk/cost that the lender has to recognise and accept. I wonder how it goes if the owner of the shares isn't aware that their broker has loaned their shares out, and wants to exercise their voting rights.
My guess is that a similar situation to voting rights would arise with respect to rights issued attaching to the lender's shares while they're out on loan. There's no way the borrower can deliver those rights to the lender so they can't be required to do so. But if the broker has loaned out the shares without the owner's knowledge, and the owner then informs their broker that they wish to exercise their rights, then it would be up to the broker to either buy the rights (if they're tradeable) and then exercise them, or to buy the resulting shares on the market after they start trading and deliver them to the owner.
EOS Price at posting:
$3.33 Sentiment: Hold Disclosure: Held
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