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There's an article which claims that short sellers + brokers + DTCC sometimes manufactures counterfeit shares through legal and less-than-legal means to attack vulnerable companies and profit from their demise. Some redditors have claimed that GME may have more shares outstanding than it should, and thus that there exist counterfeit shares. I tried to research this claim and found some suspicious numbers which I hope that more knowledgeable folks can explain.

  • According to its balance sheet, as of beginning of last year, GME had issued 64.3 million shares.
  • According to Yahoo Finance, it currently has 69 million shares outstanding.
  • Insiders hold 27.33% of all shares
  • Institutional investors hold 122%163% of all shares

I understand that the SEC allows market makers/clearing houses to maintain naked shorts which temporarily inflate the number of shares outstanding, but 5 million? Really? That's almost 10% of the total shares! And how is it that insiders + institutions hold nearly 190% of all shares? This is the part that really stood out to me. When I look at the comparable values for, say, AMZN, everything adds up as I would expect.

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  • (1) How do you manufacture counterfeit shares through legal means? (2) Yahoo is notorious for bad data so you might want to verify that their numbers are accurate and up to date. (3) You understand that the SEC allows market makers/clearing houses to maintain naked shorts. What's the source of that understanding? (4) "And how is it that insiders + institutions hold nearly 150% of all shares?" Could it be math, brought to you by Yahoo? Feb 1, 2021 at 22:07
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    (1) a market maker is allowed to create a naked short to fill a buy order without first locating a share to borrow. (2) Can you recommend a more reliable source? (3) will update the question with link Feb 1, 2021 at 22:14
  • (1) Oops, I had forgotten about market makers being is allowed to create a naked short to fill a buy order without first locating a share to borrow. I would think that there is more to it than that, meaning circumstances and regulation but I would only be guessing. 2) No, I cannot recommend a more reliable source because I have never had any need for this information. Feb 2, 2021 at 3:19
  • I don't have an answer but one guess might be related to how shares shorted can be lent out again. Person A holds 100 GME, Person B shorts GME by borrowing from person A. Person C buys the shares sold by Person B. Later, Person C lends the shares to another short seller and so on.
    – RyanH
    Feb 2, 2021 at 4:57
  • @RyanH: Yup. Unwinding the position requires a net purchase of 100 shares, and may entail a net purchase of 0 if person A immediately sells the shares for a profit (which would be sensible, because short squeezes can end very suddenly). In fact, I would think unwinding the position might be done without any shares if B offers to simply pay A market price for the shares and A accepts the offer, avoiding the risk that the price might collapse between the time B buys the stock and A is able to sell it.
    – supercat
    Feb 5, 2021 at 17:43

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