[kklisura]

Thanks for the explanation! What happens when someone shorts a stock and then the company goes under? In this case of SVB, you short a stock, company gets taken by FDIC, trading is halted and I'm assuming the company will be sold/dissolved? So what happens with the shorts?

Edit: Answered already by someone in other thread https://news.ycombinator.com/item?id=35107107

[gmiller123456]

At that point, the stock is worthless and the borrower doesn't have to return it. They keep all of the money from the initial sale.

[eru]

It's a bit more complicated.

Companies are often in limbo for a long time before they officially go under.

The borrower has to keep paying borrow costs during that time. Which makes shorting companies that go down rather risky.