any questions about the float answered in this art

any questions about the float answered in this article.

"Another related problem, that occurs with significant short selling, is the lack of disclosure that the float is effectively being increased without conveying that information to the public. The creation of phantom shares, by loans of existing shares to short sellers, boosts the float (number of freely traded outstanding shares) by artificial means even though no such increase in shares was ever authorized by the company or the SEC. For example, one company we have studied has 40 million shares outstanding and a 6 million short position. Thus investors think they own 46 million shares, even though neither management nor the SEC ever authorized the extra 6 million shares. In truth there are only 40 million shares outstanding and the extra shares have been created out of thin air by the shorts. Far from the original purpose of the practice these shorted shares often stay outstanding in virtual perpetuity.
But worse than the issuance of phantom shares is the fact this is happening on a large scale with many investors being taken advantage of without their knowledge. Again, this is because most investors are effectively loaning their shares to short sellers without realizing they are helping these short sellers to degrade the value of their securities. The ability to borrow shares to short, which has become relatively easy, works to the detriment of long-term investors and the capital formation process."

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