What's the most shorted stock on the market? 

By one metric, it's Tesla (NASDAQ:TSLA). The total dollar value of short interest in Tesla stock currently sits at about $13.5 billion.

Tesla CEO Elon Musk has made no secret of his disdain for short-sellers. He's played up his company's status as "the most shorted stock in the history of the stock market" before in a 2018 internal email, later published to Tesla's corporate blog.

But as most investors know, nominal dollar values rarely tell the whole story. If you want to find stocks that the market thinks will fall, or fail outright, don't look at the dollar value of its short position. Look at how many shares have been shorted as a percentage of all shares outstanding.

By this metric, Tesla is far from the most shorted stock in market history. It's not even the most shorted stock right now.

Man with shoulders, head, and arms down on the table, seemingly in defeat, with a chart showing steep declines overlaid above him.

Image Source: Getty Images.

There's only one stock on the market that nearly everyone seems to believe is certain to fail -- it's the only one with all its outstanding shares sold short: GameStop (NYSE:GME).

Betting on zero?

Of course, GameStop stock is worth a whole lot less than Tesla. Tesla's short interest alone is 55 times bigger than GameStop's market cap. However, everything GameStop is "worth" is currently tied up in short positions.

Everything. Every share. And then some.

TSLA Percent of Shares Outstanding Short Chart

TSLA Percent of Shares Outstanding Short data by YCharts

While about 10% of Tesla's outstanding shares are sold short, over 100% of GameStop's shares are shorted. (More on how that's possible in a bit.) GameStop stock has been caught up in this big short for months, with nearly all of its shares sold short since last November. The surge in short interest gathered speed after GameStop's ugly Q2, with the big late-year spike anticipating what turned out to be an even worse Q3 earnings report.

There are other stocks with elevated short interest, but nothing comes close to GameStop. Peloton (NASDAQ:PTON), the second most-shorted stock tracked by HighShortInterest.com, has about 93% of its float sold short.

Hope floats, shorts don't

The difference between a stock's shares outstanding and its float involves how much of that stock is accessible by the public.

Peloton's float is roughly 42 million shares, but it has over 280 million total shares outstanding. Investors can short as much of Peloton's float as they like (so long as brokerages allow it), but they can't touch the vast majority of Peloton stock unless insiders cash out.

Peloton is unusual among stocks with high short interest, since it's a recent IPO and insiders still own most of its shares.

As publicly traded companies mature, float and shares outstanding tend to converge.

Tesla, which has been publicly traded since 2010, has a float of about 144 million, and 184 million shares outstanding. GameStop's float of nearly 62 million is pretty close to its 66 million shares outstanding.

You can see how this works for these three stocks in the charts below:

TSLA Shares Outstanding Chart

TSLA Shares Outstanding data by YCharts

Is a 100% short really possible?

A stock that's sold 100% short seems to defy logic, but it is technically possible due to how short-selling works.

Short-selling involves borrowing shares from someone who owns it, selling them, and waiting to buy those shares back at a lower price.

Here's the quirk: shares can be lent more than once. If a short-seller borrows shares from one brokerage and sells to another brokerage, the second brokerage could then lend those shares to another short-seller. This results in the same shares counted twice as "shares sold short."

Many of GameStop's shorted shares may have been borrowed, sold, and borrowed again, producing the 100.6% ratio of shorts to shares outstanding.

This rarely happens, but it has happened before.

When 3Com spun off of Palm in a 2000 IPO, at the peak of the dot-com bubble, many investors saw a mispricing between the two stocks and shorted Palm's shares. According to Frank Fabozzi's book Short Selling, Palm reached a peak short interest ratio of 147.6% in mid-2000.

HP (NYSE:HPQ) acquired both 3Com and Palm in separate transactions within months of each other in late 2009 and early 2010. 3Com's operations are now part of Hewlett Packard Enterprise's (NYSE:HPE) networking portfolio; the Palm brand had a quirky "revival" in 2018 with backing from NBA MVP Stephen Curry, but it's still more a dot-com relic than a serious phone maker.

Short squeeze of the century or certain demise?

The market clearly expects GameStop to continue sinking, and the company has done little to convince investors otherwise. GameStop's focus on physical gaming hardware simply seems anachronistic now that many game publishers sell new games exclusively via digital download.

If GameStop can shock the market with good news in the near future (like a strong earnings report), it could set up the greatest short squeeze of all time. That seems unlikely, but it would certainly be fun to watch ... unless you're part of the group of investors banking on GameStop's eventual demise. The most likely outcome for GameStop is a continued slide toward obsolescence, like Blockbuster and RadioShack before it. If you disagree, feel free to buy some shares -- you'll be in rare company if you buy into GameStop expecting long-term growth.