The Divide: American Injustice in the Age of the Wealth Gap Highlight

Because shorting a stock becomes more and more expensive the longer the short bet is on. Remember, in order to bet against a company, you have to borrow shares of that stock. But so many people may be clamoring to short a certain stock that the number of shares available for borrowing may not be sufficient to meet the demand. In that case (and it can happen for other reasons as well), a stock becomes “hard to borrow,” and the cost to borrow a single share for any length of time can become exorbitant. Short sellers talk about the price of “the borrow” when they figure their costs. And in the case of Fairfax, the borrow was through the roof. Between 2003 and 2006, the cost to borrow Fairfax stock skyrocketed, to the point where a short seller had to pay a surcharge of 30 percent or more just to borrow a share.