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Novation Companies, Inc. Message Board

  • waterfallsparkles waterfallsparkles Mar 18, 2006 6:28 PM Flag

    Can Shares On DRIP Be Shorted?

    This is something I have been thinking about. If you have your shares on Drip can they be shorted? Even if they were shorted they would have to be covered or recalled prior to the Dividend as Shorts could not replace the shares allocated by the Company thru the Drip program.

    Could it be so simple to get rid of the shorts as to put your shares on Drip?

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    • Thanks Mary. That's what I was thinking too. But, I'll just be patient for a while longer. Surely the short cabal will attack the pps again before the next divvy is declared. .....Smidge

    • There used to be a discount when the pps was higher. It was discontinued and I don't know if it was reinstated. Such a discount, I believe, is taxable.

    • Shares are held direct registered to be in the company DRIP, so those shares ARE NOT available to the DTCC, and probably can not be used by shorts.

      Shares in your broker DRIPs ARE held at the DTCC, and ARE probably made available to shorts.

    • dude, you never short around div date. the question is not if DRIP shares can be shorted (they don't exist until you pay and take receipt) the question is can you cover your market shorted shares with DRIP delivered shares ...

      my basic pt here is that $84M the company got thru the DRIP HAS to be looked at as a dilutive issuance on par with a secondary ...

      trying to help. no position here

      • 2 Replies to rashomonusa
      • embraceyourinnerhillbilly embraceyourinnerhillbilly Mar 18, 2006 7:13 PM Flag

        "my basic pt here is that $84M the company got thru the DRIP HAS to be looked at as a dilutive issuance on par with a secondary ..."

        Actually, it's better than a secondary, they don't have to pay the brokerage a few million for the new issue and the DRIP shares aren't part of the float.
        NFI is a REIT and anyone who invests in a REIT needs to be aware the company will ALWAYS be issuing new shares to fund the business.

        Hey, what would happen if DRIP members transferred their shares from their brokerage accounts into the DRIP account?

      • Many investors receive DIL (payment in leu of dividend) so I believe that your assumtion about it being shorted prior to the dividend is incorrect. There are shorts that hold thru the dividend.

        But, in my opinion many of the Shorts would be forced to cover if a substancial amount of share holders had their dividend paid thru the Drip. Which is thru the Company. Even if they sell thoes shares later for the income.

        There would be no way that the Shorts could hold thoes shares as a PIL COULD NOT APPLY to thoes shares.

        If in theory everyone was on Drip the shorts would be forced to cover all of their short positions before the next dividend.