Suppose I own 4.9 million shares, the equivalent of 49%, of a company called Carnacle. Let’s say I sell one share to my buddy Warden, who owns the other 51%, for $10. Carnacle now has a valuation of $100M!
Then the next day, Warden sells his share of Carnacle back to me for $100. With 10 million outstanding shares, Carnacle is a billion dollar company!
A really smart trader named Merrit comes along and short-sells 10,000 shares of Carnacle at its last trading price, netting a million dollars. Who bought the short sale? Me.
Merrit owes me 10,000 Carnacle shares. I decide I want my shares back.
Where will Merrit get 10,000 Carnacle shares to cover his short?
Either from Warden, who is now selling his shares for $1000 a share, or from me, who will only sell my shares for $2000 a share.
And that is how IntroBiz (CYNK) became a $4 billion company last week.
Would anyone like to buy a share of Barnacle from me?