Short Selling

What you'll learn

• ✓Describe a short sale
• ✓Explain a short squeeze

Lessons

1. 🔻
   Betting Against

   How do you profit from a stock that falls?
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2. The Mechanics

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3. The Asymmetry

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4. GameStop, January 2021

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5. Final Boss: Squeezes, Sleuths, and the Big Picture

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Sources

All content is drawn from the sources below. We deliberately avoid unverified material.

• Regulation SHO (17 CFR 242.200 and 242.204)
  US Securities and Exchange Commission · institutional
  Defines 'short sale', the locate requirement, and the close-out rule used in lesson 2.
  https://www.sec.gov/investor/pubs/regsho.htm
• FINRA Rule 4320: Short Sale Delivery Requirements
  Financial Industry Regulatory Authority · institutional
  Backs the delivery and locate framing for non-listed securities discussed in lesson 2.
  https://www.finra.org/rules-guidance/rulebooks/finra-rules/4320
• Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide (hearing transcript, Feb 18 2021)
  US House Financial Services Committee · institutional
  Primary source for the GameStop hearing claims and the trading restriction narrative in lesson 4.
  https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=407107
• Staff Report on Equity and Options Market Structure Conditions in Early 2021
  US Securities and Exchange Commission · institutional
  Source for short interest, retail flow, clearinghouse collateral demands, and squeeze mechanics in lesson 4.
  https://www.sec.gov/files/staff-report-equity-options-market-struction-conditions-early-2021.pdf
• Short Sale Constraints and Overpricing
  Owen Lamont, Journal of Finance (2003) · academic
  Academic basis for the lesson 5 claim that restricted shorting tends to overprice bad companies.
  https://www.jstor.org/stable/3094530
• Wirecard collapse: filings and post-mortem coverage
  Financial Times investigation by Dan McCrum, plus EY/KPMG public statements (June 2020) · article
  Source for the Wirecard 1.9bn euro missing cash and activist-short framing in lesson 5.
  https://www.ft.com/wirecard
• Adani Group: How The World's 3rd Richest Man Is Pulling The Largest Con In Corporate History (Jan 24 2023)
  Hindenburg Research · article
  Primary report cited in lesson 5 as a recent activist short example.
  https://hindenburgresearch.com/adani/
• Volkswagen short squeeze coverage and BaFin investigation summary (Oct-Nov 2008)
  Reuters and BaFin (Bundesanstalt fur Finanzdienstleistungsaufsicht) · article
  Source for Porsche's stake disclosure, the briefly-most-valuable-company moment, and the regulator's response in lesson 5.
  https://www.bafin.de/EN/Homepage/homepage_node.html