Meme Stocks Mania: What Is ‘Naked Shorting’ and Why Is It Trending on Twitter?
William White, 07 June 2021
Naked shorting is trending on Twitter (NYSE:TWTR) today and it looks like there’s no end in sight to the meme stock mania as users react to the news that kicked this all off.
All of the excitement around naked shorting started after CNBC host Melissa Lee mentioned that the practice was taking place with shares of AMC Entertainment (NYSE:AMC) stock. The host said the following while discussing the matter.
“There’s a lot of people, a lot of short sellers out there borrowing stock they didn’t have.”
But what exactly is naked shorting anyway?
Here’s how Investopedia describes it.
“Naked shorting is the illegal practice of short selling shares that have not been affirmatively determined to exist. Ordinarily, traders must borrow a stock or determine that it can be borrowed before they sell it short. So naked shorting refers to short pressure on a stock that may be larger than the tradable shares in the market.”
Since then, there’s been even more discussion about naked shorting on Twitter. Several users are sharing a clip of Charles V Payne on Fox News earlier this year. In it, he discusses how hedge funds have been ruining companies by shorting their shares and the average investor is now fighting back. Many are comparing his speech to what is currently happening with AMC stock.
