No, the number shown is not a fictional number but the number issued on NWBO’s books and records. The notion of naked shorts is that there are more shares traded than are shown by those books and records. Some of that is endemic to the nature of trading fungible assets like securities. For instance, when a short actually does “borrow” shares to short, there is a buyer, who now owns shares, but there is a lender who nominally has a right to have shares replaced who thinks he has just “lent” them and owns them too.
However naked shorts do not even borrow the shares, they sell shares they do not own, supposedly. I think more likely and here and there you will hear one of the litigators mention it but you have legal activities like prime brokerage, and also you have the securities lending business and lastly you have treasury operations that receive collateral and they can while “holding” pledge collateral, rehypothecate those securities. In some markets the same collateral can be rehypothecated unlimited times, the same shares. Some of these practices are completely legal in foreign jurisdictions and those local regulators have strong opinions as to why it is so. Usually those securities are only treasuries and t-bills. Cash while fungible can’t be rehypothecated in the same way, as there is no distinction from one pile of cash in the same currency to another once in an account, so many collateral arrangements are for cash only these days.
I am not a proponent of the naked short notion but I do think the shorting of small cap stocks like this should be limited to hedging an actual portfolio of the stock only, and not for speculation.
One thing is clear also, the short interest should not be able to go above a certain nominal interest in a company’s number of shares as well. When shorts were shorting more shares than existed in GME, that seemed to me a kind of abuse of the market.
Now when I say I am not a proponent of the naked short idea, I still believe and said from the get go other market practices create an opportunity to game the system that disadvantages retail and those practices need to be regulated. When I first got her I believed that spoofing was likely a big issue, just because of reading many of the posts. But there are clearly aspects of the way the market works that prevent full transparency of who is shorting, how much and why. So those practices need to be not just addressed but new ways to regulate and to automate enforcement need to explored.
I own NWBO. My posts on iHub are always posted expressly as just my humble opinion (IMHO) and none are advice, just my opinion. I am NOT a financial advisor, and it is assumed that everyone is responsible for their own due diligence.
