Peregrine Diamonds Ltd. PGDIF

RE:Shorting PGD - Thought Experiement

[ekim]

Using rights to hedge a short is also fraught with fine print risk.

If you read the rights circulars...of which I have in detail....the comapny has a right to withdrawal the rights offering at any time even after distributing the rights.

So, if one were to receivve rights, sell there shares and then short an equal amount of shares to their rights holdings...they would be hedged on the face of it...but not really hedged if something went the wrong way. If a company were to get a takeover bid during the rights offering, the company could pull the rights, and look at the deal and the share price would go up and the short position would have no hedge anymore. If that comes with a halt...the short position is in limbo.

It is good to read the fine print.

LONG...PGD

EKIM