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How can GameStop be short 140% of float?

Personal Finance & Money Asked on July 17, 2021

"Short positions currently make up an impossible 140% of GameStop’s float, which is the result of a flaw in how short interest is calculated, a flaw that’s getting greatly magnified in the case of GameStop, according to Dusaniwsky."

Where is the additional 40% coming from?

Outstanding – restricted = float = max can borrow [Am I misunderstanding something here?]

Update:

So I got some validation from someone credible, I want to give special thanks to Dan Caplinger, the writer of Yes, a Stock Can Have Short Interest Over 100% — Here’s How

The following is the email conversation:

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During my research I also learnt that there are ways to prevent your long positions from being borrowed 1) you do not agree to it when signing up with the brokers 2) set up impossible GTC orders (but you should still confirm these conditions with your actual brokers)

2 Answers

TomTom is right, for the most part, that the float does not include everything outstanding.

However, in the case of GameStop, that doesn't explain all of it. As you can see from this Morningstar article, on 12/31/2020, Gamestop's total Shares Outstanding (not the float) was 69.75m shares, but there were 71.2m shares sold short at that point (the Float at that point was much lower, 27.3m).

As this Motley Fool article explains, the same share can be sold more than once, if the "buyer" of the short-sold share then lends that share out for shorting:

As an example, take a situation involving four investors. Annie owns shares of GameStop, and Annie and her broker have an agreement that allows the broker to lend Annie's shares to short-sellers. It lends them to Bob, who subsequently sells those borrowed shares short in hopes that GameStop's share price will fall.

An investor named Chris ends up buying those borrowed shares from Bob. However, Chris has no way of knowing that those shares have been borrowed from Annie. To Chris, they're just like any other shares.

More importantly, if Chris has the same kind of agreement, then Chris's broker can lend out those shares to yet another investor. Diane, another GameStop bear, can borrow those shares and sell them short.

In this example, the same shares end up getting borrowed and sold twice. The short interest volume these transactions add to the total is twice the number of shares actually involved. You can therefore see that if this happened throughout the market, total short interest would eventually exceed the number of shares outstanding and approach 200%.

Correct answer by Joe on July 17, 2021

The float is the amount of shares that are not in stable long term hands (investment funds, board members etc.) and "float" on the exchange.

As you can borrow shares from institutions that hold them long term (i.e. are not in the float) it is possible for the shorts to exceed the float.

Answered by TomTom on July 17, 2021

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