This needs some clarification. If you borrow a share, you can...

This needs some clarification. If you borrow a share, you can only do the following: return it to the lender, hold on to the stock, sell the stock to someone else or lend it to someone else. You can only do one of those things. In all of the cases except for returning the stock to the lender, you have an obligation to return stock at an unspecified future date.

If you sell the stock or loan it to someone else, then the buyer/borrower may dispose of it in a similar way ( ie, the borrower may short the stock or the buyer may lend the stock to someone else that wishes to short). As long as the seller has an irrevocable right to settle their sale, it is a covered sale, not a naked short.