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In this situation, there are more bets/people/indications/information that Company B's price will go down. Yet Company B does not necessarily look less attract
by nsrivast 17y ago
In this situation, there are more bets/people/indications/information that Company B's price will go down.
Yet Company B does not necessarily look less attractive - a high amount of short sales might mean a rise in the price when people cover (buy back) their shorts.
- michaelbuckbee 17y agoThe less/more attractive is a matter of interpretation. The core issue is that there are two different sets of rules applying to Company A (no naked short selling) and Company B (naked short selling), but to an outside observer it would appear that there is only one set (no naked short selling as per regulations). This messes up even things like what you are describing: as half the shorts on Company B are naked, there aren't any shares to be bought back, so there would likely be less of a rise than what you would expect.