Ridge froming between Green Groups and PKH, page-19

When a stock is loaned for shorting, the owner collects a fee. The owner does not realize a gain or loss on the stock as long as they continue to hold the stock but they do collect the fee. Institutional investors make money loaning shares of profitable companies thru periods of bad news. In this way, a large holder can profit on panic selling of a sound company. The seller is responsible for the number of shares borrowed plus the fee. If the shorter is able to buy back or "cover" at a price that is lower than the price of the stock at the time of the loan plus the fee, they show a profit. Thus, the short seller believes price will be lower in the future. At some point, the short seller has to repay the loan of the stock, regardless of the price, plus the fee for borrowing. A short squeeze occurs when the share price threatens to rise above the price where the bulk of short sellers sold. In order to show a profit, short sellers must buy back before incurring a loss. This is the panic buying that occurs when a fundamentally strong company is shorted based on the emotion of fear. Algorithm or 'bot' traders do this profitably, human short sellers often pay for the profit of computer based short sellers.