Monday, March 8, 2010

Voting rights on shares sold short

What happens to voting rights for shares that are sold short?

Normally, the shareholder lending out the shares will give up its voting rights to those shares while they are out on loan. This is done so that the voting power is not artificially increased just because there are shares that are borrowed to be sold short. The new shareholder (the one who bought the shares sold short) will have all the voting rights that said shares entitles him/her to. If the original shareholder needs to exercise their voting rights then they would have to call back their shares and finalize the loan so they can use those shares to exercise their voting rights. This is different than dividend rights since those usually go to both the original shareholder even while their shares are out on loan and also to the new shareholder (the one that just bought the shares that were sold short).