I saw someone
on Naked Capitalism of all places trying to justify the situation (claiming that it’s possible a stock can be shorted to 140% but that it doesn’t have to be naked shorting), saying:
There are 100 shares. A owns 90 of them, B owns 10. A lends her 90 shares to C, who shorts them all to D. Now A owns 90 shares, B owns 10 and D owns 90—there are 100 shares outstanding, but 190 shares show up on ownership lists. (The accounts balance because C owes 90 shares to A, giving C, in a sense, negative 90 shares.) Short interest is 90 shares out of 100 outstanding. Now D lends her 90 shares to E, who shorts them all to F. Now A owns 90, B 10, D 90 and F 90, for a total of 280 shares. Short interest is 180 shares out of 100 outstanding. No problem! No big deal! You can just keep re-borrowing the shares. F can lend them to G! It’s fine
I haven’t even tried to parse it; it’s the stupidest wall of text I’ve ever seen in my life. If this is your defense that the market is fine and that it’s actually some tendie-lovers from reddit who are the ones causing a disruption, I dunno what to tell ya.
This came from the comments, but for some reason NC posted this person’s defense of the market as a post.
Here's the explanation of that argument I posted a few weeks ago:
🐒 owns a 🍌. 🐍 borrows that 🍌to sell to 🦧. 🐍 wants to borrow another 🍌to sell to 🦍, but 🐒 doesn’t have any more, so they borrow it from 🦧 instead.
🐒 -lend-> 🐍 -sell-> 🦧 -lend-> 🐍 -sell-> 🦍
If that one 🍌is the only one that exists, 200% of 🍌have been shorted. 🐍 now makes double what they would have if the price goes down. 🐒 and 🦧 make money if the price goes up, but also make money from interest lending to 🐍.
But the only way the price goes down in this market is if both 🦧 and 🦍 are willing to sell a 🍌 to 🐍 at a lower price that what they bought a 🍌 from 🐍 at—and that’s stupid, why would they do that?
Normally there are enough market players to mask the stupidity of the whole situation, since there’s always someone around to make a bad trade and lose lots of money. 140% of shares being shorted means we’re no longer in that kind of normal.
If that were true it would still have been a complete clusterfuck, but it's probably not what happened. It was probably naked short selling, and the resolution was probably negotiated through back-channels so as to avoid blowing up the market.
I saw someone on Naked Capitalism of all places trying to justify the situation (claiming that it’s possible a stock can be shorted to 140% but that it doesn’t have to be naked shorting), saying:
I haven’t even tried to parse it; it’s the stupidest wall of text I’ve ever seen in my life. If this is your defense that the market is fine and that it’s actually some tendie-lovers from reddit who are the ones causing a disruption, I dunno what to tell ya.
This came from the comments, but for some reason NC posted this person’s defense of the market as a post.
Here's the explanation of that argument I posted a few weeks ago:
If that were true it would still have been a complete clusterfuck, but it's probably not what happened. It was probably naked short selling, and the resolution was probably negotiated through back-channels so as to avoid blowing up the market.