glaszman,The way I understand the methodology of penny stock mandatory street name holdings is, all shares are in street name unless you can talk your broker into having your shares put in your name, most won't.
The fact that all are in street name, any shares issued goes directly to the DTCC from the TA, there they are distributed to various brokers account all in bulk form.
The brokers put the IOU's in our accounts as a marker that we have shares as part of that bulk storage.
The broker however, is on the TA list as the one and only shareholder, regardless of how many shareholders he may have with IOU's.
When the broker has a client i.e. hedge funds, that sell short, the broker loans him the shares out of that bulk storage account, if the client sells more than the broker has in his account, the broker's MM will try to borrow from other MM's to fill the order, however if shares are not available they will fill the order anyway, causing the NSS.
This has absolutely no effect on our IOU status, they are still in our accounts and valued at whatever the market PPS is, and guaranteed by the brokers, to trade within the BID/ASK trading range.(when we are trading of course)
If the stock PPS increases and is above the collateral the client has established the broker will issue a fed call, to cover his position.
If you put a buy order in and it is confirmed and there are no shares to back it up with a PPS that puts the shorter in a margin call position, the DTCC will cover that transaction and request the broker to issue the fed call to his short client, to reimburse the DTCC.
However we all know that hasn't worked in our situation, because of the influx of counterfeit shares, that totally screwed up the procedure in the DTCC.
So with all that said, I believe the bottom line would be, if Megas issues shares to only cover the counterfeit share and any shorts "those" shares may have caused, then everything should be good to go.
Other shorts generated by legal shares will be covered by the normal course of the market, so Megas may cover some shorts but not all. IMO
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