Here's how it works: Suppose Investor A owns shares of Company X...

Here's how it works: Suppose Investor A owns shares of Company X and is willing to lend them out for short selling. Investor B, who believes Company X's stock will decline, borrows these shares from Investor A and sells them on the open market. At this point, Investor B is now in possession of the short position, betting that the stock price will decrease.Interestingly, the shares that Investor B borrowed can be lent out again. This is because the ownership of the borrowed shares transfers to Investor B, and they now have the option to lend these shares to another investor, say Investor C, who wants to engage in a short sale as well.

This chain of lending can continue, potentially leading to multiple rounds of short selling, each contributing to the temporary expansion of the effective float.