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Comment by perfunctory | Hacker News Reader

> The way short selling works is that X borrows a share from Y and sells it to Z. So Y owns one share, and Z owns one share, and X owes one share, and everything balances out and there's only one share outstanding.

Is that really true? That would mean that both Y and Z should get dividend payment, which doesn't make sense. I always assumed that when X borrows one share from Y, the Y does not own that share any more.

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Why wouldn't it make sense? If you buy a stock don't you expect to get dividends? You may have bought it from a short seller. Or you may have loaned it to a short seller (brokers often do that without your knowledge, but with your permission). Everything balances out because the company will pay to Z and X will pay to Y. What doesn't make sense is for both Y and Z to vote, for example.

@kgwgk well, the company obviously doesn't want to pay the dividend twice. So indeed they will only pay to Z. If X pays Y I presume that's just the terms of the lending agreement.

> What doesn't make sense is for both Y and Z to vote, for example.

Very good point. But it just confirms that it makes no sense to say that Y still owns a share.

Apparently, X will have to supply Y with all dividends thus making Y's position exactly the same as owning a share. I think the only difference is that Y can't sell the share? Then again, it can sell the IOU of the share to someone, and it probably costs the same as the share...

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