Yes - it's a zero sum game - in terms of number of shares! But NOT in terms of dollars. Yes, they shake the tree, as it is known, and sweep up those stop-loss sales, as well as other panic sales caused by the fear that the price is dropping. But they can MAKE the price drop, using their bots - you only have to watch the Course of Sales in real time on your trading platform to see it happening. So all their short sales become sure bets. And of course the stock lenders like MS make the fee for the loan, plus other profits along the way.
I think you made a mistake by thinking that with 9.7% of shares currently held short, and that MS hold 10% of the LYC shares, that one equals the other. It doesn't.
As has been pointed out, the shares can go round and round, in that zero sum game, without necessarily altering the net number held - see the announcements. BUT - there are more than just Morgan Stanley doing this, and some of the big stock lenders and shorters would hold hundreds of millions of shares between them - but with no holding being greater than 5% of the company, they are not obliged to disclose these shenanigans to the markets.
It IS happening - experienced Course of Sales watchers can pick it a mile off. Not to mention the whispers that come from the big end of town over the odd beer or two....
You say that they make money only when the market is fearful. Almost true - but (a) they can MAKE the markets fearful (rumourtrage, piggybacking on Fuziah et al), and (b) they can push the share price wherever they want it to guarantee that they make money - regardless of the level of fear out there. And they make money on the way down AND on the way up.
I think anyone who doubts this should read CAREFULLY and THOROUGHLY those "Change in Substantial Holdings" announcements, especially the back pages where all the shares that are lent out get listed, along with who borrows them. For a fee, of course.
I have no doubt that MS are in LYC for a longer term investment, and eventually, they will just let the share price rise (or pump it up). But in the meantime, they are making a motzah by trading in and out, stock lending, shorting, anything and everything. God for them and their clients, but frustrating for the smaller retail holders and their super funds.
LYC Price at posting:
$1.10 Sentiment: LT Buy Disclosure: Held
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