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When there are no shares available to short, it seems to me that there is a big demand for shorting and the price should go down. Demand for selling is higher than demand for buying. Buyers can't create sufficient amount of shares for shorting.

Likewise, when there are a lot of shares available to short then a lot of people are buying and shares available to short are growing. Price should rise short term.

Is this true or are there be other reasons for low and high values of shares available to short?

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    You're making the incorrect assumption that because there are no borrowable shares that there must be lots of pent up demand for additional shares to short. That may or may not be true. You are aslo incorrectly assuming that if the short interest is low, the stock should rise. Understand that for every seller, there is a buyer and vice versa. If the volume of these opposing forces is in equilibrium, share price will be stagnant regardless of the amount of borrowable shares available or the amount of shorting that is occurring.
    – Bob Baerker
    Commented Jan 8, 2020 at 22:54

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Having no shares available to short means they have already been borrowed and sold. The shares could be accurately valued already, or an expectation of worse news with unknown impact impairing the finances of a company. Always remember that the point of a company is to return value to shareholders, if the amount possible to return seems less likely, then you shouldn't put as much capital in the company - nobody should - so the share price should be lower.

But good news or a price rally could be amplified by shorts getting scared of their own increasing debt and forced to buy the stock, in a short squeeze.

So you can't necessarily tell about the future price action, but you can tell about what some investors will react to.

Another thing to understand is that short sellers have to borrow shares from investors. Investors have the option of allowing their shares to be borrowable and earning a little interest from that. Investors can turn that on and off. Large insiders or any large investor with a lot of common stock can cause short squeezes in this way, or simply make shares hard to borrow or very easy to borrow.

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This is correct except for one detail. The price already has gone down or has risen. It's not a future effect, it's a past effect.

If something happened that made people expect the price to rise in the future, then people would immediately buy that stock to benefit from the future rise. This pushes the price up until you can no longer reasonably expect any particular future rise.

So you're right, but the price change has already happened. It cannot be the case that publicly available information about a liquid stock can make people reasonably expect the price to significantly increase or decrease in the future because people with that expectation would already buy or sell the stock (or adjust their prices for doing so) to account for the future expectation.

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    Also worth adding to this that heavily shorted stocks can have very strange dynamics due to the fact that all the people who are short have to buy the shares back to deliver later (the classic short 'squeeze'), so while heavy short interest can look pessimistic, it can also be indicative of large expected price rises if they all have to scramble simultaneously to buy shares to return to the original owners.
    – Philip
    Commented Jan 8, 2020 at 8:28
  • Thanks for answer but I dont fully agree that is a past effect only. When there is abundace of shares to short then lot of people holding long position and they bet on future grow. So i believe it could be a some kind of future indicator. Maybe than watching absolute number would be better to focus on change in count of shares to short.
    – Warf
    Commented Jan 8, 2020 at 23:02
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    @Warf - This answer assumes that all information about a stock is known and therefore all buying or selling has already taken place resulting in a 'past effect'. That's not the case. For every trade, there is a buyer and there is a seller. They are evaluating current information and regardless of their conclusion, one of them is wrong. There are a litany of stocks where the shares were non borrowable for shorting long before price crashed. An extreme example is TLRY which was at $300, now a $15+ stock. That's a future event.
    – Bob Baerker
    Commented Jan 8, 2020 at 23:47
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    @Warf - It might be informative to examine some data to see if an increasing short interest aligns with price decrease and how worthwhile that correlation is, if it exists.
    – Bob Baerker
    Commented Jan 8, 2020 at 23:49

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