Rsv Shareholder's Action Group

Scribbler,

Can I try and see if I've got it right.

Say there is a company with sharecap 300 Million shares issued
Say there are 200 Million shorts unclosed

Everyone who has shares or a contract for them CAN?/MUST? post a price at which he will sell his shares/right to shares and the shorters MUST BUY the 200 Million cheapest on offer. Is that it?

Would the auction apply to all current holders or only to those who held before the new issue in the placing?

Unless the CAN/MUST ? is made a MUST it is not obvious that this solution would work given that trade data does suggest that as many as 200 Million shorts may have been opened against a pre-placing capital of 120 Million. The vast profit potential for those who participated in the placing is an issue in that it opens a separate placing v rights issue argument.

Presumably those who went into this auction would be obliged to surrender any other legal claims and with respect to the placing I'm not sure that this would be acceptable all round. I cant see the scheme working if it left the way open for any objectors not participating to pursue independent legal action.

Without the placing I suspect there might not be enough shares in existence to complete the auction or sufficiently few that the MM's could be held to ransom for £1K per share.


Overall it IS the GROSS amount of shorting relative to issue that I suspect makes this scheme unattractive. The shorters would end up with such a large holding that they would probably be obliged to make a bid for the whole company after the auction!

You obviously know of precedents where the scheme was adopted. Are they in any way comparable in scale or circumstances?