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Comment by tanderson92 | Hacker News Reader

The loophole that Soros and Icahn used is like being able to say you never cheated on your wife because you did so (cheated on your girlfriend) before the wedding ceremony and not since.

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I got that part, but I don't understand why Soros bought shorts on a stock that he just bought.

One possibility: he didn’t care about buying the stock, but instead wanted to get paid for making the transaction happen.

So he buys at 60 knowing he’s already sold at 70. Whereas Icahn sells at 60 because he can sell today rather than at whatever price it will be in 6 months.

Exactly. And as for why Icahn wants to sell -- well, he's a pre-IPO investor and might not want to stick around to settle for a public market price in 6 months when there is also possibly demand for Uber shares.

Both Icahn and Soros think that Lyft is going to lose value in the 6 months after the IPO. But Icahn can't sell for 6 months. So he calls Soros, Soros creates a short position in the stock for the amount that he's going to buy from Icahn - he can do that cheap because the stock is going to be around $72 dollars for the first few days of trading. He then buys Icahn's shares for $60. So Icahn got out at a reasonable price and Soros now created a short position at ~$70 and covered it using Icahn's shares for ~$60 giving himself a $10 profit per share with practically no risk despite the fact that he can't sell the shares he's long for 6 months. Icahn couldn't hold the short position because he's contractually obligated not to short the stock.

The very important point is he agreed the short BEFORE he bought the stock, because the sale from Icahn prohibited him from buying a short position for 6 months. He created a flat position that Icahn was contractually prohibited from creating.

Soros' position in the market doesn't necessarily express an opinion that Lyft is going to lose value. He is being paid by Icahn to facilitate the transaction, and so a reasonable goal, that he apparently pursued, is to minimize exposure while pocketing the transaction fees.

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