Institutional ownership >100%

March 27, 2010


I was checking out the stock for PALM and was wondering what an institutional ownership above a 100% means. I googled my way through and found out that, although there is no 100 % answer for this phenomenon. A possibility is when institutions/money managers have shorted the shares of a company so heavily even there do not real exist shares to cover the short. That’s one reason the ownership can jump. I wonder what will happen if the short sellers cover their position. We will see a very huge jump in the stock price.

As of march 26th the chart looks like this

The textbook book definition for a greater than 100% institutional ownership is

Because shares that are shorted are owned by more than one party (the original lender plus the purchaser on the other side of the short sale), institutional ownership can exceed 100%. If a share sold short is re-borrowed and sold again, short interest ratios can also exceed 100%.

Asquith, Pathak & Ritter. “Short Interest, Institutional Ownership, and Stock Returns.” Journal of Financial Economics.

Another related interesting term is short float.

Short float: The short percent of float is the percentage of shares short in relation to the number of shares that make up a stock’s float.

The short float for PALM is ~43% right now, which means 43 out of every 100 shares in the market are shorted. That’s a very high ratio for any company. This can be the case when there are strong rumors of a company burning to the ground. My bet is against the grain. We’ll see if this a monetary painful or fruitful learning experience

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