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Naked shorting: The curious incident of the shares that didn't exist (2005)

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Re: Naked shorting: The curious incident of the shares that didn't exist (2005)

#51

Post by femto113 »

slashdev wrote: post #7

Wow, how has nobody noticed this before? This looks seriously rotten: > Michigan-based entrepreneur Robert Simpson decided to see what would happen if he bought the entire stock of one company. Using a single broker, within a couple of days Simpson had paid a little over $5,000 for 1,285,050 shares in OTC bulletin board property-development company Global Links. According to Simpson, these shares were delivered into…

There were some compounding factors for this situation, in particular a reverse split.

"Global Links was caught off guard by the events that transpired in February 2005 when it implemented a one-for-350 reverse split of its stock, the result of which would reduce its float from 350 million shares to 1.1 million. ... Some have said it is all a simple matter of broker error. Accounts showing 350,000 old shares of Global Links should have been adjusted by the broker to show 350 [sic, should be 1000?] of the new shares, but some have said that didn't happen"

https://www.forbes.com/2006/08/25/naked-shorts-global-links-...

Re: Naked shorting: The curious incident of the shares that didn't exist (2005)

#52

Post by dalbasal »

fractionalhare wrote: post #6

Should have a [2005] in the title. This is probably showing up on HN because naked short selling is topical, but the information in the article might be misleading if it's out of date.

This is basically a crosspost from reddit.

/wallstreetbets are, in their own insane way, doing research into the most extreme tactics that short sellers have employed in the past.. expecting the entire arsenal to be employed tomorrow when trading begins.

Re: Naked shorting: The curious incident of the shares that didn't exist (2005)

#53

Post by imtringued »

jeffbee wrote: post #29

Basic rule of thumb is any company where the management is whining about shorts, and about naked shorts in particular, is garbage. The reason companies get shorted over 100% of outstanding shares is because everybody agrees they are garbage. Not a conspiracy. Go look at the stock of the absurd company in question after you read this article.

Why risk a short squeeze if it is easy money?

Re: Naked shorting: The curious incident of the shares that didn't exist (2005)

#54

Post by dalbasal »

cheschire wrote: post #30
fractionalhare wrote: post #6

Should have a [2005] in the title. This is probably showing up on HN because naked short selling is topical, but the information in the article might be misleading if it's out of date.

Honestly when I saw this link prior to the edit it was less interesting due to how topical it was. Now it’s more interesting and carries an historical aspect.

I expect that ongoing events are actually more historically significant than this one.

Re: Naked shorting: The curious incident of the shares that didn't exist (2005)

#55

Post by koolba »

sn_master wrote: post #18
rwmj wrote: post #16

Earlier quoted context omitted.

I think the more interesting part of the story (if I'm reading it right) is he paid $5000 to completely own a company with millions in assets.

Not sure about this case, but owning all trading shares doesn't mean owning the company. A company may have only 2% of its value as public shares and the rest owned by the company itself.

If you own all the shares then you can control the company via voting control. That’d generally allow you to prevent the issuance of new shares and you could hand pick the board as their terms expire. It’s not immediate, but you’d eventually be in control of everything.

Re: Naked shorting: The curious incident of the shares that didn't exist (2005)

#56

Post by tlb »

arcticbull wrote: post #23
jkhdigital wrote: post #10

The perils of fractional reserve banking can arise in any centralized custodial arrangement. As long as no one performs a physical audit—or there is no physical object to be audited in the first place—then accounting fraud can and will happen. This is, in my opinion, the raison d’etre of blockchain. Public, immutable ledgers are immune to this kind of fraud (although they have other issues, of course).

Fractional reserve banking in the real economy is utterly irrelevant thanks to the FDIC backstopping a run. In the last [edit: 88] years nobody had lost a single penny to a bank run or default including 2008s WaMu default thanks to the FDIC. Crypto fractional reserve like tether has no backstop and that’s a completely different beast. It’s what exacerbated the Great Depression. As with all blockchain unless the state…

It's less than 100 years since thousands of banks collapsed in the early 1930s and most depositors lost their money. The FDIC was created in 1933 and has prevented losses since.

Re: Naked shorting: The curious incident of the shares that didn't exist (2005)

#57

Post by cccc4all »

The most important aspect of naked short selling is why it's a thing. Naked short selling is used as a weapon by short sellers. The purpose is to push down the stock price by artificially increasing supply relative to demand, perpetuating the sell spiral. Thereby, the short sellers can further increase their profit on short sales.

Re: Naked shorting: The curious incident of the shares that didn't exist (2005)

#58

Post by ouid »

nabla9 wrote: post #26

Note: Shorting more than 100% of shares outstanding does not imply that there is naked shorting happening. You can re-borrowing the shares someone shorted and it happens.

I thought naked short selling was just short selling without a collar, which is what is actually causing the problems here.

Re: Naked shorting: The curious incident of the shares that didn't exist (2005)

#59

Post by PragmaticPulp »

arcticbull wrote: post #23
jkhdigital wrote: post #10

The perils of fractional reserve banking can arise in any centralized custodial arrangement. As long as no one performs a physical audit—or there is no physical object to be audited in the first place—then accounting fraud can and will happen. This is, in my opinion, the raison d’etre of blockchain. Public, immutable ledgers are immune to this kind of fraud (although they have other issues, of course).

Fractional reserve banking in the real economy is utterly irrelevant thanks to the FDIC backstopping a run. In the last [edit: 88] years nobody had lost a single penny to a bank run or default including 2008s WaMu default thanks to the FDIC. Crypto fractional reserve like tether has no backstop and that’s a completely different beast. It’s what exacerbated the Great Depression. As with all blockchain unless the state…

> then it’s garbage in, garbage immutably recorded.

This is the major weakness of proposals to put everything on the blockchain.

In real-world scenarios, accidents happen. Records must be corrected.

Voting is a great example. If we moved voting to the blockchain, it wouldn't automatically solve fraudulent voting problems. It would just record fraudulent votes on the blockchain. If your grandma accidentally loses her private voting keys to hackers, do we just roll over and let the hackers vote as your grandma? Obviously not.

Any future blockchain solutions to anything government-related will certainly have corrective measures and overrides overlaid on top. It's not like we're going to sit back and watch people lose their house because hackers stole the private keys to their property deed, or forbid someone from selling their car because they can't remember the password to their title wallet.

Re: Naked shorting: The curious incident of the shares that didn't exist (2005)

#60

Post by pengaru »

When the number of shares trading is no longer bound by the number of shares issued by the companies they're supposedly shares of, their value and thus price becomes completely meaningless.

Perhaps you could normalize the price using short interest %, but that's not even reported real-time and would be an approximate at best estimation of how much inflation fuckery is going on with the # of shares.

This whole thing reeks of corruption and manipulation IMHO, I'm shocked this isn't explicitly illegal and it's making me lose all interest in participating.

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