3 ms·
Well, you clearly don't understand how any of this works if you seriously think that having more than 100% of the float sold short is somehow indicative of mark
by this_user 6y ago
Well, you clearly don't understand how any of this works if you seriously think that having more than 100% of the float sold short is somehow indicative of market manipulation.
It's pretty simple really: If you want to sell short a stock, you need to borrow it first. You can only borrow it from someone who owns the stock. But each short sale also creates a new corresponding long position that can again be lent out for more short selling.
Example: Let there be a stock with a float of 100 shares that you own. You are a long-term investor L1 who loans out these stocks (for a fee) to a short seller S1. S1 borrows the stock, and sells it to another long-term investor L2. There is now a short interest of 100 shares, or 100% of the float. But L2 can again lend out those shares to another short seller S2 who sells the shares to yet another investors L3. Now you have a short interest of 200 shares, or 200% of the stocks float. But absolutely nothing illegal like naked short selling has happened, because the sum of all short and long positions still equals the float of +100. That's simply who this works.
But now we have a bunch of ignorant amateurs spreading conspiracy theories while pumping up a largely worthless company to a ridiculous valuation. And that is market manipulation, because there is no fundamental reason why this stock should be this expensive. What's more, transacting in a security for the sole purpose of raising or depressing its price in an attempt to induce others to buy or sell that security is a violation of 15 U.S. Code § 78i. As hundreds or even thousands of posts on reddit and other sites will confirm, that is exactly what these people are doing. They are publicly admitting to the crime.
Regulators cannot let this stand, because otherwise you are encouraging more of this kind of market manipulation and abuse. An example needs to be made out of those who are responsible.