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If a company disappears tomorrow, how would you realize the gains on the short? If there is no liquid stock to trade, they're just paper gains. You'd have to wa
by viknesh 4y ago
If a company disappears tomorrow, how would you realize the gains on the short? If there is no liquid stock to trade, they're just paper gains. You'd have to wait until legal proceedings end.
What you are betting on in a short position is for the company to continue to exist, but at a lower valuation.
- Thorrez 4y agoMy naive understanding: In a short you borrow then sell immediately. If the company disappears you keep the money from the sale (which you already made) and never have to return what you borrowed.
- adaml_623 4y agoI agree with you 99.8%. I think there would be a clause in any short contract where if you were unable to provide the stock at the end then you would be liable to pay the cash equivalent. If the stock had "gone to the moon" you would be bankrupt but if the stock had gone to zero then your payment would be zero (or maybe miniscule)
- MagnumOpus 4y agoThere is no such clause, and yes you would have to figure out how to obtain the delisted stock from other holders (who are generally not friendly towards you).
- seanhunter 4y agoHindenburg specialise in doing this. They know the endgame better than anyone. You can guarantee they have a plan which will result in them getting paid off if their short thesis is correct.