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I'm trying to wrap my head around the recent events of NYSE:GME, that quote the short interest to be 140.3%. I have not been able to find any satisfactory explanation as to how this is possible or calculated. Especially since most sources simply state that:

Short interest is a measure of the number of shares that are currently being shorted compared to the number of tradable shares in the market (the float).

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How can you short more shares than what is available?


UPDATE: 2021-02-01

I've since found some relevant info that relates to how large hedge funds can force stocks into pennies and eventually zero. It explains in more detail how the (shorted) stock borrowing scheme is working.

DISCLAIMER: I am not able to determine the veracity of this info.


Other Related Questions:

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  • The math works out for Short % of Shares Outstanding but I have yet to understand where Short % of Float (226.42) comes from. 61.78M short shares divided by 226.42% is 27.28M and I don't see that number in the stats. Jan 31 '21 at 13:13
  • After having looked at the added links, I think that the number of borrowed shares are simply an estimate based on possibly (near inside) information. Highlighting the issue with the current lack of more detailed shorting regulations.
    – not2qubit
    Feb 1 '21 at 9:13
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Easily.

Let's assume there's a company that has 1 share. That's right, whoever has the share owns the entire company.

The original shareholder loans the share to a borrower.

The borrower then sells the share without telling the original shareholder. Thus, the borrower has to buy the share back later because it's borrowed and the loan must be re-paid.

Somebody purchases the sold share.

The person who purchased the sold share loans the share to borrower #2.

The borrower #2 then sells the share without telling the purchaser. Thus, the borrower #2 has to buy the share back later because it's borrowed and the loan must be re-paid.

Somebody else purchases the share sold a second time.

Now you have a structure where the only share of the company is shorted twice. That's 200% short interest.

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  • 1
    That's crazy! :) So how do you see this in the company stats shown (in my picture) above? I mean what are the ingredients needed in order to calculate the correct short interest percentage.
    – not2qubit
    Jan 31 '21 at 13:10
  • If that blows your mind, read up on how the US Dollar works!
    – Fattie
    Feb 1 '21 at 13:12

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