A dumb question - for those stocks with a ratio over 1.0, does this represent inaccuracies in calculating the float, a high level of naked shorts, or some other issue?
Not a dumb question at all. The answer is that sometimes non-float shares are hypothecated, and thus are available for shorting. For example, let's say that the CEO of Biogenemedtech has 1 million shares of his $25 stock. He wants to build a $2,000,000 house, but has only a $300,000 salary. The bank won't give him a loan without additional collateral. The only additional asset the CEO has is his Biogenemedtech stock, which the bank accepts as collateral (along with an understanding about registration and lockup issues, if necessary). The bank then makes a few extra bucks lending out that stock to short sellers.
Obviously, it's also possible, as you suggested, that the float is miscalculated (a common error) or that there are a lot of naked shorts (not as common as you might think). |
