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Genuine question about false shares from naked shorts

Genuine question about false shares from naked shorts

zombrey

It's theorized that the false shares were created to sell and drop the price so as not to be margin called. They don't have them in their possession. It's pretty technical, wonky, and beyond my uneducated understanding but because of the settlement dynamics it is days or weeks before it can come to light that they sold a fake share, at which point they've created or borrowed new shares to settle up that debt. This cycling of settlements is the +21/+35 FTD cycle you may have seen hyped that causes the price to jack up regularly. Ultimately, when the price gets too high they'll need to pay their debts when margin called. They'll have to buy shares off the market to pay their lenders.


variousred

Another question about false shares created by naked shorting and marking as long. If there’s no record of it being shorted, who will ever have to buy it back?


Nooptao

They aren't false shares, as much as phantom shares. They don't actually exist. Its like they said SHF: "hey man can I borrow some shares to sell real quick?" Vlad: "yeah just make the sale I know where some are, I'll get them if we need them" Narrator: "but he did not get them when they needed them..." Then they repeat this cycle over and over with the same shares that were never actually retrieved. Sorry for formatting, on mobile don't know how... hope this is accurate and helps. I'm smooth brain af.


feckdech

They don't offer back the new phantom share, while creating more to cover what was lent before, while creating more to push the price down harder. If everybody HODLS, and buys up the recently created phantom shares the share's price won't ever fall to 0. EVER. Win win situation if we wait.


anthro28

Think of it this way: I own a motorcycle. You want a motorcycle. I sell you the motorcycle. Next day, someone else wants the motorcycle. I sell them the motorcycle. Now there are two sold motorcycles, but only one physical unit. I’m hoping that you don’t like it and return it (at a lower value than I sold it to you for) and then I tell the other guy “yeah we ran it on the dyno to break it in real good. She’s all ready for you to just go ride.” But what happens if you are an ape and don’t return it? I’m fucked.


sbash1

Okay, let’s say I’m selling my house. The new buyer gets a deed handed to him and all is square. That’s a real share. Instead of selling his house, my neighbor took out a home equity loan and kept the money. Then he put the house up for sale and received payment from a willing buyer promising to be out in 30 days. He did this not once, but over and over. Before the end of the next 30 days, he takes the payment received from the latest buyer and refunds the previous buyer the cost of the house plus whatever amount it appreciated. Each time he refunds a buyer, his cost goes up. Doesn’t matter how many cycles this goes on, in the end he still owes on his home equity line and has less overall cash to operate with.


Lazy-Target-7148

Mostly because we own most of their fake shares so in order to cover they need us to sell :)