Anna lends Bob a book, Bob lends Charlie the book, now the book is 200% lent out. It's arguably risky and stupid to be Bob, because now he's in trouble if Anna wants the book back and Charlie doesn't want to return it, but there's nothing illegal about this.
> In shorting, it sounds like you can sell the same share to 2 different people.
You have to obtain (buy or borrow) the share twice in order to sell it twice.
If I short a stock, I borrow the share and the sell it on the market. If I loan the share to someone else and they sell it then it is still only sold once.
In my opinion it's more likely that people were either selling naked calls (which would convert into an IOU for stock) or that people were selling shares that didn't actually exist on the open market.
I don't know enough about settlement to verify the latter claim, but there are some reports of shares taking an excessively long time to settle. Those kind of irregularities should probably be more closely investigated.
The share can then, afterwards, be loaned out and sold again. This causes it to be “double sold” and you’ll see something like the 140%.
Alice loans share to Bob, Bob sells to Carol, Carol loans to David, David sells to Eve.
Bob and David are both short sellers. There is only one stock. It has been sold twice.
I've seen the same argument more than once this weekend but this flood [1] (also linked from the TFA) says otherwise:
In order to meet legal requirements, the broker has to find un-lent shares (so the same shares aren’t lent twice). The PB will “tag” those shares, indicate to the client the prevailing cost to borrow, and provide the client a “locate ID” that guarantees that client those shares.
[1] https://twitter.com/compound248/status/1355276755980980225
I’m not 100% sure this is correct though, someone please let me know if I’m wrong.
Is there a reason why it isn't, other than the obvious one that Wall St corrupted the US govt a long time ago through bribery (lobbying)? Eg. Biden's treasury secretary has already been bribed (colloquially called "speaking fees") to the tune of $7.2M.
Back in the 1920s I could make a company, issue a bunch of stock, and then go around telling people how amazing and profitable my company is, selling stock door to door.
There is no reason to make this illegal and put effort towards banning it. Eg, I'm not losing any money and it is entertaining. If I think the price after the shorts get involved is too low I can buy the asset in question. Why should I, in my capacity as a taxpayer, be getting involved and spending money through my government?