Lonmin rights issue could be disrupted by short-selling The FTSE 250 company has a record 20.4pc of its shares out on loan, a proxy for the level of interest from short-sellers who are betting that the share price will fall. The shares on loan represent at least two thirds of what can be borrowed, according to data from Markit, the financial information services company, making Lonmin one of the most heavily shorted companies in the index. On average, FTSE 250 companies have just 1.8pc of their shares out on loan. The high short interest could signal uncertainties around Lonmin's newly announced rights issue, warned researchers at Markit. The mining group said on Tuesday it would be conducting the $800m rights issue, which represents close to half its market value, to pay down debt and repair its balance sheet. The move came after Lonmin's Marikana mine became the scene of South Africa's worst violence since apartheid, when in a single day in August police shot dead 34 people involved in strikes. The labour action continued for six weeks and meant it lost around 110,000 ounces of platinum production, damaging its balance sheet. Investors have welcomed the rights issue plans, with the shares rising following Tuesday's announcement. Normally a rights issue would weigh on a company's share price, but Lonmin has said that it is fully underwritten. However, the amount of shares out on loan could have implications for the rights issue, said Markit, as "long-only" institutional investors would need to call their shares back from short sellers to exercise their rights to buy new shares via the rights issue. A company would ordinarily need investors with at least 75pc of its shares to agree to back a rights issue via a vote, but Lonmin is expected to need 50pc as the rights issue is underwritten. Meanwhile, the underwriters of the rights issue - whom the company has not yet named - could struggle in any attempts to hedge against shareholders not taking up rights. That is because a restricted supply of shares to borrow makes it more expensive to hedge a position. However, analysts welcomed Lonmin's announcement. Deutsche Bank's Rob Clifford said the size of the rights issue should "ensure the company's survival."