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A contentious practice known as “naked short selling” involves investors selling shares of a stock they do not own and do not plan to borrow. Since a significant number of short sellers may push a company’s price down and lower, this strategy is frequently blamed for lowering stock prices.
According to Sec.gov “In a “naked” short sale, the seller does not borrow or arrange to borrow the securities in time to make delivery to the buyer within the standard two-day settlement period. As a result, the seller fails to deliver securities to the buyer when delivery is due; this is known as a “failure to deliver” or “fail.”
AMC & APE stock have been two stocks which experience massive fails to deliver every single month, which APES think is direct evidence of naked short selling.
The basic idea behind short selling is that an investor believes a stock’s price will go down, so they borrow shares from another investor and sell them on the open market. If the stock’s price does indeed go down, the short seller can buy the shares back at a lower price, return them to the original owner, and pocket the difference. However, in the case of naked short selling, the short seller does not borrow the shares before selling them, which can result in an excess supply of shares and put downward pressure on the stock’s price.
Critics of naked short selling argue that it can be used to manipulate stock prices, as a large number of short sellers can drive a stock’s price down, making it easy for them to buy the shares back at a lower price. Additionally, the excess supply of shares created by naked short selling can also make it difficult for companies to raise capital, as they may have a hard time selling new shares if the market is flooded with shares from short sellers.
In conclusion, naked short selling is a contentious tactic that has the potential to lower stock values. It may be a tool for manipulation and make it challenging for businesses to raise money. Investors should be aware of this strategy, and authorities should keep an eye on it to stop any unlawful activity.