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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: DLS who wrote (12851)	8/7/1998 8:49:00 PM
From: Bilow	Read Replies (3) \| Respond to of 164687

Hi DLS; About the statement : There are no borrowable shares which implies that half the investors are long and the other half are short. Each short sale of a single share increases the number of shares held by bears and also the number of shares held by bulls. Thus 7.3MM shares short means that there are an extra 7.3MM shares held by bulls. It could be that some of the shares held short are held by the same people who hold shares long, in which case they are boxed. A given share can be sold short any number of times. The shorting must stop only when either: (1) The share is sold short to a long who does not allow it to be borrowed. (This would be the case for some institutions, as well as the usual cash (i.e. non margin) account.) (2) The share is borrowed by someone who then doesn't sell it. I see the second case every day at Block trading in Seattle. We are only allowed to short YHOO if the back office says it has shares to short. If we want to short them, we ask. They respond "how many?", if any are available. The office usually gets 2000 shares, but it rarely sells them all out at any given time. All 2000 shares are generally bought back by the end of the day. Since we are day traders, we cannot supply shorted sales to long term investors. That is, our shorts are covered at the end of the day. In any case, the fact that there are no shares to borrow, just means that all the shares have been borrowed, no that they have actually been sold. It is also a fact that the buyer of a share does not know if the shares he buys are from a short seller or a "real" owner. It is my (possibly mistaken) understanding that the brokerage that holds shares purchased from a short does not know that the shares are were shorted. Therefore they can lend them out to shorters at there own or other companies as well. Consequently, it is possible for the same shares to be shorted by, say 5 people, and owned, therefore, by 5+1 = 6 people. In this case, (for the example of a million shares), the total number of shares held long would be 6MM, and the total number held short would be 5MM. Those who have taken the requisite examinations in the securities industry recently, please correct me if I am wrong. I read a lot, but I do miss things. When the above case occurs of more shares shorted than exist, there is no problem unless person or group manages to gain control over more shares long than actually exist. They can then perform a short squeeze. They do this by transferring (possibly slowly) there shares from margin accounts where they can be lent out, to cash accounts where they cannot be lent. As this happens, the shares lent out of the margin accounts are "called" back to the lender. The account who shorted the shares then has to give them back, by either borrowing the same number of shares from a third party, or buying that many on the market. If no shares are available to borrow, he must buy them. If the securities and exchange commission finds out about a short squeeze like this, they generally close down trading in the stock. This has happened frequently in the past with small issues, and has happened historically with occasional big issues. I don't believe AMZN is now or ever was in the presence of a short squeeze. Shorts have been difficult to borrow, but I have not been reading of people being forced to buy back shares on the open market because their shares were called. (On the other hand, a lot of shorts had to buy back shares when their declining equity caused a margin call, but this is not a true short squeeze.) Given a float of, what, 20MM, and a short size of 8MM, this would give about 28MM of long shares, and 8MM of short shares, though I don't know what the true figures are for AMZN right now. -- Carl