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So this one is wrong? https://money.stackexchange.com/questions/98418/does-short-selling-create-additional-share-in-the-market https://money.stackexchange.com/

• cortesoft 6y ago
  No, it is saying something different. You can only loan out your share of stock once, but the person who buys the stock can lend it out again. So let's imagine there is one share of a stock and person A owns it... they lend it to person B, who sells it to person C, who lends it to person D who sells it to person E.... Now, person E is the only person who currently holds an actual 'share', and is the only person who can lend it out. Person A and C will have an IOU saying they will be given back their share at date x... they can sell the IOU, since it has the same value as a share, but they can't lend out an IOU.
  • neartheplain 6y ago
    Can the value of that IOU drop to zero if the lendee can't return the share, e.g. if lendee no longer holds the share and none are for sale? Does the IOU specify alternate restitution in that case?
    • cortesoft 6y ago
      The broker usually guarantees the stock to the lender, and will sell any other assets the short seller has to cover. A broker isn’t going to let the short seller get in too over their head. While conceivably what you are suggesting could happen, I don’t know if it ever has.