I think the misconception is thinking that shares, once loaned, are somehow locked. In the above scenario, Alice and Chuck open their Robinhood account and see

I think the misconception is thinking that shares, once loaned, are somehow locked. In the above scenario, Alice and Chuck open their Robinhood account and see 100 shares just the same as Eli or any other long. In reality their shares are actually on loan, but they're probably not even aware of it. If and when they go to sell their positions, it will instantly execute, and the broker will recall the shares before settlement (which occurs three days after the trade's executed.) So, in fact Bob and Dave now have their pick of the litter and can buy back from either Alice, Chuck, or Eli.