Assume you decide to sell 100 shares of company ABC short. Your broker has located another investor who has a long position on 100 shares of ABC and is willing to lend you the shares to short-sell, allowing you to open your position.

After a few weeks, your prediction proved correct, and the shares fell. Your lender has decided to close their long position for a loss due to short-selling pressure, so their shares are no longer available to you. Because the shares have become 'unborrowable,' you are forced to close your position and sell them back to them.

An unborrowable stock is a stock that cannot be borrowed by traders looking to short-sell it. One example of an unborrowable stock could be a small-cap stock with limited liquidity. If a company has a low float (the number of shares available for trading), there may not be enough shares for brokers to lend out to short sellers.

For instance, a thinly traded biotech company might have its shares concentrated in the hands of insiders or institutional investors. This scarcity makes the stock hard to borrow, which limits traders' ability to execute short-selling strategies. Additionally, during times of high demand for shorting or heavy volatility, even larger, more liquid stocks may become temporarily unborrowable as shares are in limited supply.