01-29-2021, 12:58 AM
sekker wrote:
Keep in mind, the only reason the 'mob' is even able to try to 'corner' the market is because short sellers started first. At some point, 25% of GameStop stock was shorted.
About 140% shorted last I heard.
https://www.fool.com/investing/2021/01/2...100-heres/
Yes, a Stock Can Have Short Interest Over 100% -- Here's How
In this latest short-selling controversy, many investors have been confused by the sheer level of exposure that short-sellers have to certain stocks. For instance, GameStop recently had short interest that exceeded 100% of its available shares. That left many investors completely gobsmacked -- but there's a simple explanation for how situations like the one we're currently in can come about.
...As an example, take a situation involving four investors. Annie owns shares of GameStop, and Annie and her broker have an agreement that allows the broker to lend Annie's shares to short-sellers. It lends them to Bob, who subsequently sells those borrowed shares short in hopes that GameStop's share price will fall.
An investor named Chris ends up buying those borrowed shares from Bob. However, Chris has no way of knowing that those shares have been borrowed from Annie. To Chris, they're just like any other shares.
More importantly, if Chris has the same kind of agreement, then Chris's broker can lend out those shares to yet another investor. Diane, another GameStop bear, can borrow those shares and sell them short.
In this example, the same shares end up getting borrowed and sold twice. The short interest volume these transactions add to the total is twice the number of shares actually involved. You can therefore see that if this happened throughout the market, total short interest would eventually exceed the number of shares outstanding and approach 200%.
...Given this ability to multiply the number of available shares into massive short positions, a short squeeze could have a cascade effect. When GameStop's share price goes up, both Bob and Diane are under pressure to cover their positions. Yet to do so, they each have to find available shares they can buy and return to Annie and Chris, respectively. When sellers aren't readily available, they'll have to pay through the nose to entice them. That's how the short squeeze accelerates.