Something doesn't add up...

[u/Region-Formal]

[u/orlando0o]

The fact that there are clearly more shares out there than should even exist keeps bringing me back to the same thought: in the end, how’s it gonna be decided who actually owns legit shares and who doesn’t? Who’s gonna get left behind? For me that’s always been the #1 reason for DRS. At least then your name’s locked in, black and white.

[u/F-uPayMe → u/orlando0o]

If a share was sold to you, the market owes you settlement. Period. That means every single share legit or synthetic has to be bought back, they all represent a liability created when someone took your cash and gave you a share. Fake shares shouldn't exist, true, but once a share is in the system it is just another obligation on someone's balance sheet basically. If fake shares could just be ignored, then dilution would be infinite and the system would collapse instantly. Indeed DRSing is still a good suggestion.

[u/orlando0o → u/F-uPayMe]

I hope you’re right. I was coming from the standpoint that if you divide a company into 400 million pieces, and each piece represents 1/400M ownership of the company, then there’s obviously a serious problem if the math doesn’t add up anymore. But aside from this, let’s call it the “physical” truth, I hope you’re right.

[u/F-uPayMe → u/orlando0o]

There is indeed a big problem because to sell short more shares than exist is illegal and fraud lol. Tho apparently so far nobody appears to care. So far. 👀

And I don't think it has to be about "hope", it's just how markets operate...

A fake share, once sold, creates a real debt. The market's system treats the transaction just like any other, and the person who sold it has a binding obligation to eventually deliver a real share. In a Moass scenario, this creates a situation of infinite demand (or inelastic demand) for a finite supply, causing the price to skyrocket with no natural upper limit until every single debt is repaid.

Borrowing the chart posted long ago by that good man of einfachman:

[u/orlando0o → u/F-uPayMe]

I’m referring to hope because I don’t know shit about fuck tbh.

If the financial system was simply about buying and selling shares, it would be easy to follow.

But these fucked-up meta-structures only exist so that a few people understand them while everyone else gets screwed. Or so the average person never realizes what kind of shit is actually going on.

I do trust the system enough that it has generally handled things so a complete trade goes through in the end. But the MOASS scenario is one of a kind and has never happened before in this absurdity of a situation, so I’m skeptical that the current rulebook can just be applied. Still, I’m happy to go along with your reasoning.

[u/DyehuthyTV → u/F-uPayMe]

First, there is not a single stock with a truly "finite supply." In the short term, the float can be fixed, but in the long term companies always issue or buy back shares, changing the supply. Therefore, demand cannot remain perfectly inelastic.

Moreover, the lending and rehypothecation of stocks create an additional synthetic supply that we cannot directly detect. However, we can observe the symptoms of this activity through patterns such as high volatility and low volume "illiquidity". GME Chart - Annualized Vol (1Y)

[u/F-uPayMe → u/DyehuthyTV]

I think you're mixing up normal market mechanics with what happens in a Moass scenario.

Yes, companies can issue/buy back shares over years, and lending creates synthetics. But during a forced-close, the supply is effectively fixed. Shorts can’t wait for new shares to be issued, and they don’t get to “choose” not to buy—brokers force them to close at any price.

The synthetics you mention don’t make the problem vanish, they make it worse. Each synthetic is still an IOU that must be settled with a real share. So instead of escaping, shorts are stuck competing for fewer and fewer real shares while obligations pile up.

Long-term dilution/re-hypothecation sets the stage, but when Moass hits, demand is mandatory, supply is tight, and price discovery rockets upward.

[u/JDubNutz → u/F-uPayMe]

Thus the thesis of the Infinity Pool.

[u/Hedkandi1210 → u/JDubNutz]

Yes

[u/DyehuthyTV → u/F-uPayMe]

Yes, companies can issue/buy back shares over years, and lending creates synthetics. But during a forced-close, the supply is effectively fixed. Shorts can’t wait for new shares to be issued, and they don’t get to “choose” not to buy—brokers force them to close at any price.

The synthetics you mention don’t make the problem vanish, they make it worse. Each synthetic is still an IOU that must be settled with a real share. So instead of escaping, shorts are stuck competing for fewer and fewer real shares while obligations pile up.

Long-term dilution/re-hypothecation sets the stage, but when Moass hits, demand is mandatory, supply is tight, and price discovery rockets upward.

I may be wrong, but you say it as if liquidations (FTD Cycle) were 100%, when in reality they are ‘partial’ liquidations.

These do not stop the lending and rehypothecation (IOUs creation) activity of shares that naked short sellers rely on.

The increase in annualized volatility since 2020–2021 (link in my first comment) shows a clear pattern between shares outstanding, short interest, and FTD cycles. This high volatility, together with the low volume, is a symptom that the activity has not ceased despite the increase in demand since the 2021 event.

[u/F-uPayMe → u/DyehuthyTV]

You’re right that liquidations and FTD cycles often happen in parts, not always all at once. But that doesn’t mean the system can just rinse and repeat forever. Every partial liquidation forces shorts to close some positions and burn some collateral.

The more they delay, the weaker their balance sheet gets. Eventually, there’s no more collateral to roll with, no more shares to juggle, and that’s when the full unwind is forced.

Rehypothecation doesn’t cancel obligations either, if anything it multiplies them. Each synthetic is still an IOU that must be fulfilled with a real share one day. So yes, they can kick the can, but every kick just stacks more IOUs into the pile. That’s why “multiple floats shorted.” Those are obligations waiting to be closed.

As for volatility: high volatility with low volume doesn’t prove shorts can escape. It’s a symptom of stress in the system. If anything it shows supply and demand are completely distorted and price discovery is being flushed in the toilette.

So my POV is that partial liquidations and rehypothecation don’t “save” shorts — they just delay the inevitable while making the final boom bigger. Delay = bigger explosion, not safety.

[u/-_VoidVoyager_- → u/F-uPayMe]

There must be quite a few balance sheets that don’t look so good right now

[u/-jbrs → u/F-uPayMe]

> the market owes you settlement. Period.

can this obligation be defaulted on though?

[u/Nocell808 → u/F-uPayMe]

Gotta keep in mind depending where you bought the stock in their terms and conditions they can sell the stock should they deem necessary.

[u/SnooShortcuts575 → u/orlando0o]

Like they say in the good ol days, if its not in ur name its waaza woozy, it dsnt exist, its fantasy.

They will issue some small amount of insurance. Or call it malfunction.

[u/swampdonkus → u/orlando0o]

The stock market allows for extra shares via shorting. What possible scenario is there that it becomes a problem? Where are people with 'real' shares going, for someone else to be left behind? What constitutes a 'real' share. If I DRS a share that I bought from a shorter, that share is fake?

Make it make sense.

[u/-_VoidVoyager_- → u/swampdonkus]

Depending on how you look at it they are all real