Replies to post #698067 on NorthWest Biotherapeutics Inc (NWBO)

[evanstony]

Naked short selling differs from normal short selling because naked shorting involves the selling of shares without having first borrowed the shares. Thus, the naked short seller is selling shares they do not own, and shares that aren't confirmed to even exist. If the seller is required to close their position, there are no borrowed shares to return to the original owner. This may result in the failure to deliver the shares.

Naked Short Selling Regulations
Short selling is regulated by the Security Exchange Commission (SEC), which was given this authority under Section 10(a) of the Securities Exchange Act of 1934. The SEC's primary objective is to protect the interests of investors. It's this objective that led the SEC to ban the practice of naked short selling in the U.S. after the financial crisis of 2008.

As explained in Regulation SHO, naked shorting creates a risk of "fails to deliver" (FTD). This is because naked short selling is done without first borrowing shares. Thus, if a naked short seller is required to cover or close out their position, and shares are not available, the seller will fail to deliver the shares to the buyer.

The Commission's concern is that persistent and large-scale failures to deliver can deprive shareholders of their rights of ownership, such as voting. Furthermore, an FTD on the settlement date may create an additional risk of stock price manipulation, which occurred on a wide scale during the financial crisis of 2008.

the MM's can manage the float to some extent with real sales... but the FTD's on naked short sales "may" create a circumstance that goes unresovled during a "vote".