I think it's possible that whoever shorted those shares in yesterday's late trade, has sold them to an entity that they knew would allow them to borrow them back so they could short the same shares again. That's how Gamestop ended up with over 100% of the float shorted, with shares being short sold to a party that then proceeded to lend them again for shorting purposes. In theory, three parties can work together and endlessly short the same shares. Here's how it would work:
– Party A has 1m shares of company X, and lends them to Party B so Party B can short them. .
– Party B arranges a cross trade with Party C, and sells the shorted shares to them via cross trade. At this point, Party A still technically owns 1m shares (shares lent for shorting purposes remain on the books of the lender), Party B has a short position of 1m shares, and Party C own the 1m shares they have just bought from Party B. So, 1m shares has now turned into 2m (Party A and C both own 1m shares), with 1m shorted shares outstanding.
– Party C then lends the 1m shares they bought from Party B (when Party B shorted them) back to Party B, which shorts them again, cross trading them directly to Party A. Now Party A have 2m shares on their books, Party B have a short position of 2m shares, and Party C has 1m shares on their books.
– Party A then lends Party B the 1m shares they just bought, so Party B can short them again, cross trading them directly to Party C. Party B now has a short position of 3m shares, while party A still has 2m shares on their books, and Party C also has 2m shares on their books.
At this point, 1m shares has now resulted in ownership of 4m shares. Yes, there are 3m shorts outstanding, however until they are covered, the total number of shares held by all holders of company X is 3m shares greater than the float – they have literally created shares out of thin air. This is my main issue with shorting; that those who lend their shares to other parties for shorting purposes are allowed to keep the lent shares on their books, as it artificially increases the number of issued shares until the shorts are covered. Removing this loophole would prevent a lot of the games that big money entities play with shorts IMO.
Hope that all makes sense lol.
ASM Price at posting:
$4.09 Sentiment: Hold Disclosure: Held
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)