Edit:
The question this was closed as a "duplicate" of while related and interesting, does not ask or answer the question I'm asking.
What it asks is what happens with regards to things like votes and dividends while there are outstanding long positions. One of the answers also covers what happens when a short squeeze forces short positions to cover when very little (but non-zero) stock is available for perchance.
Specific it doesn't cover the question of what would happens if shorts are some how force to cover their position when no stock is offered for sale.
Original question:
Basically a short squeeze, but even more so.
- Person Z buys 10% of the float.
- They offer to loan it to short positions (with some sort of obligation to return it by a fixed date).
- The shot positions sell it back into the market.
- Person Z buys another 10% of the float.
- Go back to step 2
- Repeat until Z is long by >100% of the float.
At this point there can be plenty of liquidity as 90+% of the stock is in owned by people other than Z. But what happens if Z then switches to doing nothing at all? They just let all the loan terms expire, collecting the returned shares but refuse to sell anything. Eventually they own all the shares, but someone still owns them more and there are none to buy... at any price.
Granted this is 100% hypothetical and almost surely wouldn't happen in real life, but if it did... ?
The closest situation that I could see actually happening would be a contract denominated in a currency that no longer exists (say it was in DEM before the Euro came along) with no provisions for anything else. But in that case both parties are motivated to resolve the situation. But in the hypothetical above, the long position doesn't care.
At a guess, some court would step in and either declare the long potion to be illegal, force a sale of shares at some set price, force the long position to accept something else of value or just declare the short positions bankrupt and liquidate them.
