Replies to post #94780 on Cytodyn Inc (CYDY)

[Chuckles759]

I found some additional explanation here on my question:

https://www.investopedia.com/ask/answers/05/lendersellshare.asp

Quick question to those more familiar with how trading houses and brokers work.

- Say a CytoDyn shareholder had 100K shares $CYDY that were just sitting in their trading account - no sell or buy orders on them.
- There are indications of a run up and shares are being borrowed short on $CYDY.
- That CytoDyn shareholder then puts in a limit sell order on all 100K shares $CYDY at $100.

1) Would the CytoDyn shareholder's account be affected at all to prevent putting the sell order in at $100 due to the shares "borrowed" on their account?
2) Would the broker that let them be "borrowed" just cover both - which indicates to me that those "borrowed" shares have no backing and become "naked shorts" and effectively mean that the number of shares the broker holds has doubled until EoD where someone would have to settle?
3) Would any of the sellers that "borrowed" any of the shares be given notice that they have to scramble to find a new source?

I do not consider any responses to be investing advice and hopefully everyone else will regard responses the same.

....AFAF

...hehehehe....It should all be in the timing....heheheheeh....

[cowtown jay]

Your ability to enter a sell order would not be impacted by your broker having loaned your shares.

A few years ago, a large brokerage (I think it was GS), would send a letter to their clients every day indicating how many shares of various securities were available to borrow. The short sellers would then use that letter as a "locate."

So if GS had 100,000 shares to loan, and five of their clients used that letter to satisfy a locate requirement, then 500,000 shares were shorted.

But no problem. If during the day GS was asked to loan shares, but they showed all the shares available that day were already loaned, all the broker had to do was hit the F2 key on their computer, and all the available shares at the start of the day would be restored. This went on for years.

The default setting when you open an account at your brokerage is as a margin account. You have to ask to have a cash account, which I did with TDA. No magic "buying power" shows up on my account. And my shares can't be loaned.

In a margin account, even if you did not use margin to buy your shares, those shares can be loaned. No money for you, but especially on hard to find shares, big money for the broker.

In another company in which I owned stock, a lender decided to sell the shares he was entitled to in lieu of repayment of his loan, after the sufficient time had passed. The TA advised the guy that the company did not have sufficient shares available. That's what happens when you're naked shorted. And yes, the TA was ultimately charged in that case. And the clearing firm, Penson Financial, was charged with naked shorting.

[ohm20]

If those shares were already borrowed out and a sell order was made the broker would have to cover from another source or those would become naked. No notice would be given to the shareholder. Now there is what is called phantom shares which are naked shorts that never become covered. It is problematic as those phantom shares act in the marketplace as real shares and are dilutive. The SEC should be prosecuting every single case of this happening but they're in bed with the perpetrators.

https://www.cato.org/sites/cato.org/files/serials/files/regulation/2008/2/v31n1-7.pdf