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he's describing short selling Some brokers will lend out your stock holdings (usually it's in T&C or you have the option to opt-in to lending for a cut of the

he's describing short selling Some brokers will lend out your stock holdings (usually it's in T&C or you have the option to opt-in to lending for a cut of the interest) to short sellers These short sellers sell the borrowed stock and hope its price drops and they can buy it back for cheaper. As shares are fungible, the borrowed share the short-seller has sold gets bought by someone, so two people "own" the same share. In reality, two people are owed a share by the broker, the broker owns a share, and the broker is owed a share by the short-seller, so everything adds up The short-seller will have posted collateral and if the price of the stock rises too much the broker will force them to sell the collateral to repay their borrowed stock.

NovemberWhiskey 4y ago
I know what short-selling is, and I understand the stock-lend business, but what the poster is describing doesn't have any resemblance to it; particularly this part: >So now both, you and the other shareholder think they own the same share in Tesla. If I have an account with a stock-loan feature, and my broker lends a short-seller my share then I no longer own the share. We can tell that because, for example, I no longer have the voting rights associated to the share, and, if a dividend were declared (forget we're talking about TSLA obviously) then I wouldn't receive it from the issuer; but from my broker (who gets it from the short-seller). The short-seller then sells the share to someone else. They own that share then as the holder of record.
- ArtTimeInvestor 4y ago
  Since the broker mixes up all the shares they buy anyhow, how would Tesla know it is you who has voting rights? How would they know whom to pay dividends? Isn't it all an abstraction by your broker anyhow? They just show you pixels on your screen, that you have "received" dividends. But its not like Tesla sent them to you. Its just an illusion your broker creates on your screen.
  - NovemberWhiskey 4y ago
    Tesla knows because, even if the stock is held in street name, my broker still registers me as the beneficial owner. The difference between receiving a dividend paid to the beneficial owner of stock and receiving a payment-in-lieu of a dividend is very much not illusory - there can be significant tax implications.
  - colechristensen 4y ago
    Which shares are loaned are assigned. There is a record of who owns what and who borrowed what from whom.

NovemberWhiskey 4y ago

I know what short-selling is, and I understand the stock-lend business, but what the poster is describing doesn't have any resemblance to it; particularly this part: >So now both, you and the other shareholder think they own the same share in Tesla. If I have an account with a stock-loan feature, and my broker lends a short-seller my share then I no longer own the share. We can tell that because, for example, I no longer have the voting rights associated to the share, and, if a dividend were declared (forget we're talking about TSLA obviously) then I wouldn't receive it from the issuer; but from my broker (who gets it from the short-seller). The short-seller then sells the share to someone else. They own that share then as the holder of record.

ArtTimeInvestor 4y ago
Since the broker mixes up all the shares they buy anyhow, how would Tesla know it is you who has voting rights? How would they know whom to pay dividends? Isn't it all an abstraction by your broker anyhow? They just show you pixels on your screen, that you have "received" dividends. But its not like Tesla sent them to you. Its just an illusion your broker creates on your screen.
- NovemberWhiskey 4y ago
  Tesla knows because, even if the stock is held in street name, my broker still registers me as the beneficial owner. The difference between receiving a dividend paid to the beneficial owner of stock and receiving a payment-in-lieu of a dividend is very much not illusory - there can be significant tax implications.
- colechristensen 4y ago
  Which shares are loaned are assigned. There is a record of who owns what and who borrowed what from whom.