I feel like this is still a little bit of an over-simplification.
Sure, I get the point about "short interest", that is what is legally being shorted. Based on your definition of the other type of shorting that OTCShortReport shows, all of that is "legal" or "just making the trade happen" kind of stuff.
But that is not the end of it, and I'm pretty sure you know that.
You know that there is illegal shorting taking place that isn't properly reported, and you also know that price manipulation is taking place in the "legal shorting" approach that you detailed.
I am not saying that every share that OTCShortReport says was shorted was a manipulation. But companies are able to take an order, provide requested shares (let's say 10k shares for this instance) and say that the sale happened at .023 while providing those shorted shares. Now they have to actually buy those shares to cover, and as you suggested, they have a cup of coffee (or two, or lunch, or a vacation) then they come back in and cover at .021 (probably more reasonably at .022 or .0225).
I feel pretty confident in believing that type of manipulation, and more tricks that I am not even aware of, is taking place. But, we will go along with the roses theory that all MMs and institutions are on the up and up, and would NEVER manipulate even the ruddy-poo penny stock, because of course that would just be a waste of time.
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