/biz/ - Business & Finance

>>27312154
If a company issues 10 shares and a hedgie buys 5 then lends them out to Wojak who sells them short to Pepe, we end up with Pepe and hedgie owning a combined 10 shares. With the other 5 shares still held by insiders, there are 15 shares in total even though only 10 were issued, so 150% of shares exist for said company. Wojak is required to buy back 5 shares to return the shares owed to hedgie so that only 100% of shares exist again. This is perfectly legal.

Naked shorting occurs when someone happens to 'borrow' shares from somebody that doesn't exist or selling someone's shares without permission. This is illegal. Stocks bought and sold in a transaction must be settled within 2 days. The buyer must deliver the cash and the seller the stock. If either party fails, a failure to deliver takes place.