“Take no action” borrow: Difference between revisions

“Take no action” borrow (view source)

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 {{a|gmsla|}}In a normal [[stock borrow]] {{gmslaprov|Lender}}s can elect against {{gmslaprov|Borrower}} on {{gmslaprov|Loaned Securities}} — see for example, Paragraph {{gmslaprov|6.7}} of the {{gmsla}}.
+===Example===
+As an example, {{gmslaprov|Borrower}} borrows {{gmslaprov|Securities}} in [[Teldar Paper]] from {{gmslaprov|Lender}}.  {{gmslaprov|Teldar Paper}} announces a tender for 20% of the company. The final allocation of the tender is announced at 30%. {{gmslaprov|Lender}} closes out 30% of {{gmslaprov|Borrower}}’s position at the tender price. This is called being “held liable”.
-As an example, {{gmslaprov|Borrower}} borrows {{gmslaprov|Shares}} in [[Teldar Paper]] from {{gmslaprov|Lender}}.   {{gmslaprov|Teldar Paper}} announces a tender for 20% of the company.  The final allocation of the tender is announced at 30%.  {{gmslaprov|Lender}} closes out 30% of Borrower’s position at the tender price.  This is called being “held liable”.
+An alternative is the [[“take no action” borrow]], where the {{gmslaprov|Lender}} promises to the {{gmslaprov|Borrower}} that they will not be “held liable” — i.e., the {{gmslaprov|Lender}} won’t exercise its rights receive equivalent cash and assets from participating in the [[corporate event]].
+===Benefits===
+{{gmslaprov|Lender}}s offer [[TNA borrows]] at a much higher fee than standard borrows — fair enough, as they are giving up the right to participate in the corporate action, which might be priced attractively. On the other hand the {{gmslaprov|Borrower}} can participate in the benefits the corporate action without taking any of the risk associated with it — they can eventually give the shares back after all.
-An alternative is the “take no action” borrow, where the {{gmslaprov|Lender}} promises to the {{gmslaprov|Borrower}} that they will not be “held liable” — i.e., the {{gmslaprov|Lender}} won’t exercise its rights receive equivalent cash and assets from participating in the [[corporate event]].
+{{sa}}
+*{{gmslaprov|Corporate actions}} under the {{gmsla}}
-{{gmslaprov|Lender}}s offer [[TNA borrows]] at a much higher fee than standard borrows — fair enough, as they are giving up the right to participate in the corporate action, which might be priced attractively. On the other hand the Borrower can participate in the benefits the corporate action without taking any of the risk associated with it — they can eventually give the shares back after all.