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> Only with naked shorting can there be more shares traded than float Why? Imagine there exists one share of GME, owned by Alice. Bob borrows it from Alice and
by umanwizard 6y ago
> Only with naked shorting can there be more shares traded than float
Why? Imagine there exists one share of GME, owned by Alice. Bob borrows it from Alice and sells it to Charlie. Now both Alice and Charlie own one share, and no naked short sale ever happened, as far as I understand that term.
- tonyarkles 6y agoI don't know if there's a name for it, but while not naked, it's still a dubious situation unless Bob has secured some way to get the share back to Alice when Alice wants it back. Say Charlie has decided to go hold that share forever; how is Alice ever made whole? In the only-one-share-exists situation, there's no real way out of that. In a situation where more than one share exists, Bob could, say, obtain a call option so that he at least has a plausible way to acquire a share in the future to make Alice whole.
- myownpetard 6y agoThis results in a similar situation to GME where the short interest is > 100%. WSB wants to be Charlie. They want to hold the share that Bob is legally obligated to buy and can't purchase anywhere else. They can then demand whatever price they want for it.
- myownpetard 6y agoMy understanding is that this leads to short interest greater than 100% but not more shares traded than float as there is still just one share. In your example Alice doesn't own the share at this point, she owns an agreement that says she will be returned a share in the future and is paid interest on it in the meantime.