RE:RE:Securities lending and shortingVery interesting program. Here's the problem I see. Let's say you pay $10/share and the broker will pay you 44%/year for you to lend them your shares so that someone else can short them. As Marcellomac says, someone else has serious interest in shorting this particular stock. Fast forward twelve months. Your book value is now $10 less the $4.40 the broker pays you, so it now has an adjusted cost base to you of $5.60. But because of the short, the market price of the stock has crashed to $2. You are now in a loss situation.
I would be wary of this deal unless you had
full confidence in the valuation of the stock.
A broker offering such an opportunity could be a sign that the real value of the stock is currently overvalued.
Cheers!
Marc
scruffman wrote: Why would anyone not agree to this? Seems like a no brainer or am I missing something here?
marcellomac wrote: I received the following email from Schwab for my US account this morning - and they are offering a 44% APR on my Medmen sharres. No such offer for Organigram or my oither Mj stocks. I have held equities through Schwab for over five yeard and this is a first. Looks like someone is looking to seriously short medmen. Is anyone else seeing this? On what stocks? | | | Earn income for lending securities | | |
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| | | We're writing to offer you a unique income opportunity through Schwab's Securities Lending Fully Paid (SLFP) program. Enroll in SLFP, and you can receive monthly income for lending securities to Schwab that are in high demand by other investors.
Benefits of the SLFP program include:
- You can sell loaned securities at any time.
- You can end loans at any time.
- Income accrues daily and is paid monthly.
- You'll receive 100% collateral for loaned securities.
- You can participate at no cost to you.
Next Steps
Please go to [address deleted] for more information and to enroll in SLFP. You'll also see which securities we'd currently like to borrow from you, and how much income you can earn. You can also call us at [phone number delted] Monday through Friday, 8:30 a.m. to 4:00 p.m. ET.
Important considerations
Security Price. There is the potential for downward pressure on the price of a security you lend if the security is borrowed to facilitate a short sale.
Dividends. If you have a security on loan to Schwab when it's scheduled to pay a dividend, you will either receive the dividend or a substitute payment in lieu of dividend (PIL). You may have to pay a higher tax rate on a PIL, but Schwab currently issues a discretionary payment to help compensate for additional taxes.1
Voting Rights. Upon lending a security to Schwab, you will lose the right to vote on corporate actions by the issuer.
Loss of SIPC Protection. Because borrowed securities may not be covered under the programs of the Securities Investor Protection Corporation (SIPC), loans are secured by collateral provided by Schwab.
Thank you for the opportunity to serve you. If you have any questions or need assistance, please call us at [phone number delted[, Monday through Friday, 8:30 a.m. to 4:00 p.m. ET. |
Read more at https://www.stockhouse.com/companies/bullboard?symbol=c.mmen&postid=29036370#LEqjC448zIO7S4Wz.99