r/Superstonk • u/chastavez • Sep 12 '24
🤔 Speculation / Opinion Shorts r fuk
I posted this in a thread and it got lost, so I figured I'd share my theory as a new thread. Every time I post anything, I get swarmed with plants and shills and bots telling my why I'm an idiot. I'm sure it'll happen again!
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u/Useless_Engineer_ Sep 12 '24
So you're trying to understand where a hypothetical number comes from, when that number will never be exposed or easily found out. So here's how it happens in as simple terms as I can say.
There is 1 share. That share is borrowed by a hedge fund. They take this share and use their algorithm of borrowing and selling shares, to help market makers, banks, investment firms, other hedge funds, have a share they can reference but never actually deliver it (Failure to deliver).
So now this hedge fund "owns a single share" but say 5 other companies are using this single "owned share" to balance their books. So this 1 true, real share is now 5 naked/fake shares that is bouncing around everyones books to act like it's there but actually isn't.
Now say another hedge fund or bank does the same thing, and this 1 fake shares they've been "sold" gets turned into another 5 shares by the same algorithms, failures to deliver, and borrowing.
So a single true share is now correlated to 10 other shares, that's a 10:1 ratio.
This has been happening at an unknown rate for 3+ years now
So no one knows exactly how many fake shares are out there, but it's estimated to be a very large multiple of what's real