LOL - I get it but you are creating a straw man and asking me to knock it down. Name a single example of a situation where the number of shares sold exceeded the float (and if you say GLKCE I'm not going to stop laughing until next week...lol).
The myth of selling more shares than the float is a fantasy created by bloggers and message board posters (and perhaps a group of lawyers shopping for a jurisdiction in which to file a class action lawsuit). But I await a real life example - I might have missed it (that has been known to happen...lol).
On a serious note, I think the financial risks are just too great for the market makers involved. Your suggestion that the sellers who sold short beyond the float are under no obligation and can just walk away is just not an accurate description of the markets.
Bottom line? If it happened (in your scenario when there are no shares in existence to cover with) there would be hell to pay.
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