From: schindler@csa2.lbl.gov
Newsgroups: misc.invest
Subject: Re: street name vs delivery
Date: 27 Dec 1992 18:14 PST
Organization: Lawrence Berkeley Laboratory - Berkeley, CA, USA
Distribution: usa
NNTP-Posting-Host: 128.3.254.197
News-Software: VAX/VMS VNEWS 1.41    

In article <1992Dec26.225559.21164@cbnews.cb.att.com>, ask@cbnews.cb.att.com (Arthur S. Kamlet) writes...
> 
>>I want to take over the XYZ Corp. XYZ is public and is controlled by
>>an entity holding 55% of all shares. I go and buy the remaining 45%
>>of all shares. I hold it in a street name so that it can be shorted.
>>I subsequently short one third of my shares against the box and have
>>my partner buy it. Now I own 45% of XYZ, and my partner owns 15% of XYZ.
> 
>Your partner (assuming this was legal -- it isn't)  owns 15% of XYZ
>short.

The partner is long 15% of XYZ and has 15% of the voting rights.

>---
> 
>Look, there's a huge difference between holding stock in street name
>or holding stock in safekeeping or your own vault; and shorting
>stock.   In terms of voting rights, your broker will forward to you
>(or the company itself will forward to you) a proxy for stock held
>long.  If you shorted stock, the person you borrowed it from gets to
>vote it.  In fact the person you borrowed it from doesn't even
>know you borrowed it!  This borrowing thing, it's all done with
>mirrors.
>-- 
>Art Kamlet  a_s_kamlet@att.com  AT&T Bell Laboratories, Columbus

But this can't be, Art.  You are saying that if I short some stock the person
I borrowed the stock from gets to vote it.  It is true that I certainly won't
get to vote it.  But what about the person that buys it from me?  They will
also be long the stock.  We thus have two parties that are long the stock:
the person I borrowed it from and the person I sold it to.  Who gets to vote
the stock?  They both can't vote it, because each share only has one vote.

The person I sold the stock to doesn't know he bought his shares 
from a short seller.  If he takes delivery of the stock, he holds in his hands
the actual stock certificate.  He is the one that gets to vote these shares.
What about the person I borrowed the stock from?  Doesn't he get to vote his
shares?  He is long the stock and not short it so you would expect that he 
gets to vote his shares.  But no!  He doesn't get to vote.  His shares have
been borrowed away.

If you want to make sure that your shares don't get borrowed away you can take 
delivery of the certificates.  Then you will always get to vote.  But there
is another way...

Throughout this thread no one has yet mentioned one of the important differences
between a cash and a margin account.  Your stock cannot be borrowed away from
you if it is in street name in a cash account.  Thus you will always get to 
vote the stock in your cash account.  If you hold the stock in your margin 
account, as you must do to margin the stock, then your shares can be borrowed
away, along with your voting rights.  

Aaron Schindler

P.S.  I was the one that started this thread by wondering whether to hold
my stock in street name or take delivery.  I have since decided to take 
delivery because I found out that my wife works in the same building in 
Chicago as the Chicago PBS branch.  So, if I sell a stock, she can drop the
certificates off during her lunch hour.  The main reason for not leaving 
the stock in street name was to make sure I get the quarterly reports.