BP: Sold Short?

British Petroleum is not only damaging the American coastline, but also the pockets of British pensioners. BP paid 6.6 billion in dividends in 2009, equal to 1 in every 7 paid out by FTSE 100 companies. Six of Britains biggest pension funds have also invested 23 billion in BP.As BP stock dropped 33% during the first week of June, many would assume an opportunity has arisen for pension funds and hedge funds alike. For hedge funds, the opportunity to short BP must be tempting. Even if the company manages to clear the beaches, a legal and criminal arsenal is being readied by a partisan American government. For pension funds, demand for BP stocks may also be appealing, with the possibility of no dividend and increasing demand from hedge funds for BP stocks. However, according to Data Explorers, only 0.5% of BP stock is out on loan, a figure that has remained constant since 2009. There are also millions of BP shares available for loan even if demand increases.Instead, politicians and the media have scared hedge funds away from shorting BP stocks. In the UK, if hedges fund decided to short BP, they would have to disclose their net short position if it reached 0.25% or more. No hedge fund wants to be blamed for causing BP share price to fall, damaging the pockets of pensioners pockets.One silver lining that will be swiftly ignored is the fact the BP proves that short selling does not force share price to fall. Because hedge funds are afraid to short BP, they are dumping stock instead, which is causing BP share price to plummet. Despite the protestations of politicians, short selling has nothing to do with falling share prices.