I'm pretty sure you're wrong about this and this isn't 'naked shorting'.
I have pretty low confidence in the detailed specifics here, but I saw some discussion on Twitter that naked shorting being legal could have actually prevented the squeeze we're seeing. [0]
The reason for the extra >100% has to do with how the stock lending works (Matt Levine wrote a bit about this recently). [1] Quoted below.
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"This does not necessarily mean a lot of people are doing evil illegal nefarious naked shorting! Really, I promise! There is no special limit on shorting at 100% of shares outstanding! Here is an explanation of how options market makers (discussed below) are allowed to short without a locate, but I want to offer an even simpler explanation. There are 100 shares. A owns 90 of them, B owns 10. A lends her 90 shares to C, who shorts them all to D. Now A owns 90 shares, B owns 10 and D owns 90—there are 100 shares outstanding, but 190 shares show up on ownership lists. (The accounts balance because C owes 90 shares to A, giving C, in a sense, negative 90 shares.) Short interest is 90 shares out of 100 outstanding. Now D lends her 90 shares to E, who shorts them all to F. Now A owns 90, B 10, D 90 and F 90, for a total of 280 shares. Short interest is 180 shares out of 100 outstanding. No problem! No big deal! You can just keep re-borrowing the shares. F can lend them to G! It's fine."
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I still think what Robinhood did here is both wrong and a stupidly short-sighted that will damage their brand, but there's so much over confident misinformation about what's happening surrounding this that it makes it harder to understand.
The NYT is no better - another dumb Taylor Lorenz article got less right than most random Twitter threads.
[0]: https://twitter.com/simoj_/status/1354664677364609026
[1]: https://www.bloomberg.com/news/newsletters/2021-01-25/money-...
I have pretty low confidence in the detailed specifics here, but I saw some discussion on Twitter that naked shorting being legal could have actually prevented the squeeze we're seeing. [0]
The reason for the extra >100% has to do with how the stock lending works (Matt Levine wrote a bit about this recently). [1] Quoted below.
--
"This does not necessarily mean a lot of people are doing evil illegal nefarious naked shorting! Really, I promise! There is no special limit on shorting at 100% of shares outstanding! Here is an explanation of how options market makers (discussed below) are allowed to short without a locate, but I want to offer an even simpler explanation. There are 100 shares. A owns 90 of them, B owns 10. A lends her 90 shares to C, who shorts them all to D. Now A owns 90 shares, B owns 10 and D owns 90—there are 100 shares outstanding, but 190 shares show up on ownership lists. (The accounts balance because C owes 90 shares to A, giving C, in a sense, negative 90 shares.) Short interest is 90 shares out of 100 outstanding. Now D lends her 90 shares to E, who shorts them all to F. Now A owns 90, B 10, D 90 and F 90, for a total of 280 shares. Short interest is 180 shares out of 100 outstanding. No problem! No big deal! You can just keep re-borrowing the shares. F can lend them to G! It's fine."
--
I still think what Robinhood did here is both wrong and a stupidly short-sighted that will damage their brand, but there's so much over confident misinformation about what's happening surrounding this that it makes it harder to understand.
The NYT is no better - another dumb Taylor Lorenz article got less right than most random Twitter threads.
[0]: https://twitter.com/simoj_/status/1354664677364609026
[1]: https://www.bloomberg.com/news/newsletters/2021-01-25/money-...