# What happens when short interest exceeds outstanding shares

Let us say there are 100 outstanding shares of company X held by investor A. Investor B comes in, borrows these 100 shares and short sells them to investor C.

Which means, outstanding shares=100, short interest =100.

Investor B borrows these 100 shares again from C and short sells them to investor D.

So now, short interest is 200 and outstanding shares is 100.

In this case, how can B fulfill his obligation to return the 100 shares to A and 100 shares to C? He can only buy 100 shares but he is short 200 shares

• D and C are both long 100 each. B can buy from both to close the positions. Feb 14, 2015 at 23:35
• Thanks. I am confused between your answer and mike Scott answer. They both seem correct, but they aren't the same. Feb 15, 2015 at 3:36
• I can't source it but I believe that borrowed shares cannot be loaned out again. IOW, B can borrow from A and sell to C but C cannot loan those shares out for another short sell. If that were allowed, short sellers would have an infinite supply of shares to short. Dec 17, 2019 at 14:22
• Then hedge fund owners get very angry on national TV and collude with stock brokers to avoid the situation. (Future readers: Google 'wallstreetbets gamestop short squeeze robinhood') Jan 29, 2021 at 20:41