[BrendanLong]

Investment info sites seem to be skeptical that there's anything wrong with naked shorts. They became illegal after the 2008 crisis, but they're bad in the sense of being extremely risky, not that they're fraudulent.

It's also unclear if naked shorting is actually happening here. It's entirely possible for the short interest to be far above 100%. Consider this setup:

- WidgetCo floats exactly one stock - Alice buys the one stock (short interest = 0%) - Alice lends the stock to Bob - Bob sells the stock to Carol (short interest = 100%) - Carol lends the stock to Dave - Dave sells the stock to Eve (short interest = 200%) - Repeat until short interest reaches the moon

Bob and Dave both legitimately borrowed a shared and sold it, so there's no naked shorting going on.

I suspect what's happening with GameStop is that the stock price is just so absurdly overvalued that short interest has reached a level that people previously thought was impossible.

[breatheoften]

Interesting I suppose I didn't realize the exact definition of "naked" -- I was regarding "not naked" a bit more abstractly as "protected from inability to purchase the share when required" with "naked" implying that you did not have that protection ...

To me the deviation from the abstract definition above almost Seems like a bug in the "borrow checker" ... I'm not totally clear on why the system is designed allow the same stock to be "loaned" multiple times in this manner ...

Why is this (not particularly sound) definition of "borrow" desirable ...? I suppose this scheme has the effect of making assets appear more liquid than they might actually be -- but -- why is that good?

Doesn't it seem like there's a kind of bias introduced by this "illusion of more liquidity". Saying this mechanism "increases liquidity" feels almost like putting grease on a slope and saying "the slope is steeper" ...

[aikinai]

> I suspect what's happening with GameStop is that the stock price is just so absurdly overvalued that short interest has reached a level that people previously thought was impossible.

This is backwards. The stock was already over 140% shorted when it was valued less than the cash it had on hand. Plus there were a number of factors converging on a potential turnaround. That's how this all started; it was originally a strong value play with the short squeeze as only a possible cherry on top. You can check the old videos from Roaring Kitty on YouTube to see the original analysis.