So this one is wrong?

https://money.stackexchange.com/questions/98418/does-short-s...

No, it is saying something different. You can only loan out your share of stock once, but the person who buys the stock can lend it out again.

So let's imagine there is one share of a stock and person A owns it... they lend it to person B, who sells it to person C, who lends it to person D who sells it to person E....

Now, person E is the only person who currently holds an actual 'share', and is the only person who can lend it out. Person A and C will have an IOU saying they will be given back their share at date x... they can sell the IOU, since it has the same value as a share, but they can't lend out an IOU.

Can the value of that IOU drop to zero if the lendee can't return the share, e.g. if lendee no longer holds the share and none are for sale? Does the IOU specify alternate restitution in that case?

The broker usually guarantees the stock to the lender, and will sell any other assets the short seller has to cover. A broker isn’t going to let the short seller get in too over their head.

While conceivably what you are suggesting could happen, I don’t know if it ever has.

Honest question. How does that explain what happened with VW? I always thought there was a supply problem with shares to be shorted.

https://moxreports.com/vw-infinity-squeeze/

Yes but what I’m saying is that the float doesn’t increase from 100 -> 200. There’s still only 100 shares on the market at any given time.

If Alice shorts 100 cows on Monday, and then Bob shorts 100 cows on Tuesday, and both are due at close of market on Friday, it’s gonna be a bloodbath.

Shorts aren't "due". You can hold them as long as you pay the interest and have the margin requirement.

Not always true. I've had brokers force me to close short positions (esp in '08-'09) because 'no shares available' which forced me to buy at the market in order to close out the position. It had nothing to do with interest or margin.

(Granted, they were some pretty illiquid stocks so I suspect that the broker had managed to get into a naked short situation when they allowed the trade to execute before actually trying to go out and borrow them. Of course, their mistake was made my problem.)

I'm not saying that your example isn't valid, but it's kind of different than what you are responding to.

Your short position may have been called, but (I am assuming) you didn't take out a short position with an explicit expiration date. Ie, it wasn't "due" on Friday, and you likely didn't know days/weeks in advance of when it was going to be called.

No, it wasn't called. The broker would inform me, after executing the trades, (typically after the close on the day of the trade) that they literally could not borrow the shares and would send me a 'sucks to be you' message saying I had to close the position before the end of the settlement period or they would close it for me at the market price on settlement day. IIRC, it was less than 72 hours notice and I was given no option for any amount of money to keep the position open. Since these were thinly traded stocks, there were no options available on them so I couldn't keep it going that way either.

No, the person who lent the share out can demand it back and refuse to lend it out again... normally, the short seller would just turn around and borrow another share from someone else to sell short, "rolling over" their short position, but that assumes there is another share to borrow. There usually is, it not always.... and it might be VERY expensive to borrow if it is a heavily shorted stock.