"Who the hell can sell shares that don't exist???? "
It's impossible to know for individual companies at ant moment in time because of the lack of regulatory monitoring but the acknowledge practice of naked short selling demonstrates that it is possible for there to be a belief that there is >100% of a companies issued shares floating around. Fact is there is not more than 100%. In the case of short selling, the lender will still have his total holding on his "books" (because he has only loaned them), the shorter will show the debt # of shares on his books & the buyer of the shorted share will have all the ones he has bought from the shorter on his books.
It's sort of like the fractional banking system.
One analogy I read makes it pretty easy to follow the distortion that shorting brings to the market:
Imagine you are playing poker & you have a royal routine ... unbeatable, worst case could be a draw. The guy sitting opposite you has nothing. If there is no table limit he can just keep raising you until you run out of the ability to call his raise & you have to fold. Short selling, both normal & naked, has brought that practise to the stock market. The huge hedgefunds etc have the ability to keep "raising" a short position far longer than the market is prepared to fight it. It's only when the market capitualtes & no longer has the stomach to take the long position against the "bully" that the bully then covers (having also gone long just prior) & skins the market on the way back to it's true (supply/demand equilibrium) position.
It is hard to imagine how anyone but the bullies can see any merit in this system
