Cap Re held Fido added

[Getitrt2]

I'm glad to hear Tilson feels so comfortable about his IOC short position. I can hardly wait for him to start suffering big time from it. I wonder where he'll cover, hopefully not below three digits. Hasn't it been quite a while since he's shown up on CNBC? Hopefully, more people have wised up about that all-mouth phony.

[Getitrt2]

Okay people, help me out...on the stock loan info. 1. Some of our BIGs are loaning their stock out, seems quite reasonable with the high short interest. 2. When the stock is loaned, a receipt is issued at the price the stock was loaned to the long holder by the brokerage house. 3. The short is "marked to the market" daily, so as to hold the broker risk free. 4. Who is owning with any equity gain if the stock trades higher, the broker or the person loaning the stock to the broker? This is a key question to be answered by someone out there. 5. I am hearing that a stock loan by a long to a broker puts the long at risk of not receiving a gain from the point of loan til he recalls the stock loan, at which he is then long the stock again at the recall price. Am I reading this correctly? 5a. If so, it appears our BIGS can yank the rug out from under the shorts by recalling their stock loan and forcing buy ins. And they can do this when they so choose? 6. If so, then the shorts in this situation are the highest risk situation in IOC if our mgt. information is correct, as I believe it is. 7. So, the decision to cover a short is mostly in the hands of the long stock holder and occurs mostly when the stock starts a run higher. Or, the broker, if he sees undue risk to his position, can also force a cover of the shorted stock. 8. This should infer that the real stock squeeze, if it occurs, should be mostly when the long stock holder fears losing out on a move higher on bona fide good news. At this point, a short faces the possibility of losing control of the short stock, in this case IOC. 9. For now, this situation depends on NEWS to trigger a noticeable move higher. Or beforehand, our BIGS get wind of bullish news ahead, and want their stock back. Is this the correct way to view this situation? 10. If so, the shorts control of IOC price behavior is quite short term, til some of them decided to get to the front of the short covering line. 11. If I were IOC, I would periodically this month be releasing news that builds the probability that the shorts are wrong on IOC. I SEE THE RISK IN IOC, IF THE ABOVE IS CORRECT, ON BEING SHORT THIS STOCK!

Loaning out shares would not impact the performance of the fund.  They would benefit fully from any appreciation.  I do not believe you can vote shares that have been loaned however.  That would be a  real reason to call in shares.  No portfolio manager who had full say in what shares were loaned out would take 5% for IOC, IMO.

A few comments:

Mutual fund portfolio managers do not control the loaning out of fund shares, and therefore have nothing to do with calling them in.  That is controlled by investment firm/broker dealer management and back office.

Long owner share values are not affected by the shares being loaned out, and I believe they still vote the shares also, even longs in margin accounts where shares are in street name.  The broker/dealers have no participation in gains or losses on loaned out shares.  If they go up, the long gains and the short loses and vice versa.  The decision to cover is in the hands of the short as long as he is able and willing to meet growing margin cash requirements as the stock goes up;  otherwise, the broker/dealer can force coverage (buy the stock in) at whatever price it's at.  If the stock becomes no longer available for loan, the broker/dealer and/or short will have to find loans elsewhere or cover, if they follow regulations.

[SamAdams]

Okay people, help me out...on the stock loan info. 1. Some of our BIGs are loaning their stock out, seems quite reasonable with the high short interest. 2. When the stock is loaned, a receipt is issued at the price the stock was loaned to the long holder by the brokerage house. 3. The short is "marked to the market" daily, so as to hold the broker risk free. 4. Who is owning with any equity gain if the stock trades higher, the broker or the person loaning the stock to the broker? This is a key question to be answered by someone out there. 5. I am hearing that a stock loan by a long to a broker puts the long at risk of not receiving a gain from the point of loan til he recalls the stock loan, at which he is then long the stock again at the recall price. Am I reading this correctly? 5a. If so, it appears our BIGS can yank the rug out from under the shorts by recalling their stock loan and forcing buy ins. And they can do this when they so choose? 6. If so, then the shorts in this situation are the highest risk situation in IOC if our mgt. information is correct, as I believe it is. 7. So, the decision to cover a short is mostly in the hands of the long stock holder and occurs mostly when the stock starts a run higher. Or, the broker, if he sees undue risk to his position, can also force a cover of the shorted stock. 8. This should infer that the real stock squeeze, if it occurs, should be mostly when the long stock holder fears losing out on a move higher on bona fide good news. At this point, a short faces the possibility of losing control of the short stock, in this case IOC. 9. For now, this situation depends on NEWS to trigger a noticeable move higher. Or beforehand, our BIGS get wind of bullish news ahead, and want their stock back. Is this the correct way to view this situation? 10. If so, the shorts control of IOC price behavior is quite short term, til some of them decided to get to the front of the short covering line. 11. If I were IOC, I would periodically this month be releasing news that builds the probability that the shorts are wrong on IOC. I SEE THE RISK IN IOC, IF THE ABOVE IS CORRECT, ON BEING SHORT THIS STOCK!

Loaning out shares would not impact the performance of the fund.  They would benefit fully from any appreciation.  I do not believe you can vote shares that have been loaned however.  That would be a  real reason to call in shares.  No portfolio manager who had full say in what shares were loaned out would take 5% for IOC, IMO.

A few comments:

Mutual fund portfolio managers do not control the loaning out of fund shares, and therefore have nothing to do with calling them in.  That is controlled by investment firm/broker dealer management and back office.

Long owner share values are not affected by the shares being loaned out, and I believe they still vote the shares also, even longs in margin accounts where shares are in street name.  The broker/dealers have no participation in gains or losses on loaned out shares.  If they go up, the long gains and the short loses and vice versa.  The decision to cover is in the hands of the short as long as he is able and willing to meet growing margin cash requirements as the stock goes up;  otherwise, the broker/dealer can force coverage (buy the stock in) at whatever price it's at.  If the stock becomes no longer available for loan, the broker/dealer and/or short will have to find loans elsewhere or cover, if they follow regulations.

Getitrt2

I have spoken previously with the head of operations of a mutual fund firm.  I was told you can not vote shares that are loaned out.  If Firm A loans stares to hedge fund B who then sells them to Firm C, you now have two firms who appear to have the right to vote those same shares.  My background is not operations but that is what I was told.  Most times it is probably hard to track and many investors don't vote their shares.  Should this go hostile it could matter very much and you would want your shares in hand, particularly if you had a big position..

Many PMs are not aware of what shares are on loan because firms sign master agreements that allow the wall street firms access to thier inventory(stocks in various mutual funds) that they can service their HF clients with.  A PM could intercede on behalf of his fund clients, but there is an internal political price to pay.  There is an arbitrage here between what the fund firms are paid and what the HF's are willing to pay.  I would think a Fidelity would capture as much of this as possible for their clients, but this was not always the case in the industry.  Wall Street firm A pays 1-2% fee, with perhaps an upfront to the MF firm and with full access  to inventory they can loan out the pieces to their HF clients at higher rates.  This example is based on a real life deal.

[Getitrt2]

Thanks, Sam, interesting. I wasn't sure about the voting, which is why I said "believe; makes sense.

[SamAdams]

Nothing wrong with your post.  I appreciate your contribution on SHU and just trying to make mine where they can add value and based on experience.