Maybe someone who is good at stonks can help me understand a key piece of the mechanics and practice of short selling: the motivations of the underlying asset holder (1/a few)
So you own an asset and you agree to lend it to someone else. In exchange for the fee you collect, you lock yourself into your investment in the underlying asset. You have a contract that says you get the asset back at thus-and-such time, whatever its value may be.
Meanwhile your counterparty has only entered into the contract because they believe your asset will decrease in value.
Why do you do this? If you think your asset will hold its value, then you can collect a fee from the short seller without realizing a loss yourself. Makes sense.
If you think that your asset might decrease in value for the long term, then presumably you would simply sell it instead of lending it away and robbing yourself of the ability to avoid the loss.
Maybe you might have tax reasons to realize an investment loss to offset gains elsewhere. But the tax savings would have to outweigh the opportunity cost of not selling in the first place.
So, are underlying asset holders always implicitly betting against the people shorting their assets? Are there ways for them to gain even if the shorters win?
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