At a stock brokerage firm, A has 1000 shares of a stock in a margin account, while B has 500 shares. The stock brokerage firm holds all these shares in street name and can lend these shares to short sellers at any time. The firm has lent 600 shares to short sellers, but A and B now want to vote in a proposal. Do A and B get to vote using the remaining 900 shares in proportion to the number of shares they own (A can vote using 600 shares, B can vote using 300 shares)? How does voting work when some of the shares have been lent to short sellers?
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The purchaser of the shares sold short is the holder of record and is entitled to the voting rights and the dividend. When the short position is closed, the borrowed shares are returned to the lender and the dividend and voting rights return to the initial owner.
Bob Baerker
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