It is different for every broker. This is how it works in theory.
Assuming there are 100 shares of a company x traded in an exchange. 85 of them held by institutions. 15 of them changing hands between longs and shorts being held by brokerage firms. Now shorts increased that 15 to 25 by borrowing it from brokers promising to repay back the shares they borrowed. Brokerage firms agrees on it as they get commissions. The shares lended by the broker is your shares which does not have a "limit price set". The moment longs start setting limits on their shares, the shares are unavailable to short.
"The moment longs start setting limits on their shares, the shares are unavailable to short."
That's a fallacy. GTC or Good for 60 Days Limit Orders do not remove shares from the available pool of shares for a security. Contrary to popular belief, those orders do not make your shares unavailable to short sellers and/or your broker. For example, if you call your bank and request a 100K cash withdrawal for the following day, the bank does not remove the money from your account until the actual withdrawal occurs.
Brokers are in the business of making money. Generally speaking, brokers deliberately make certain shares unavailable in order to command a premium to borrow the shares - 5-15% premium, in addition to margin interests. Hedge funds are always able to borrow shares or engage in naked shorting. The system is stacked against retail investors.
Would that suggest there are a lot of naked shorts out there? A run on shares would be interesting to watch. Although I have a growing skepticism on company performance (but I don't think the wheels have fallen off..just a slow down), I do believe this stock is way oversold.
Where have the shares gone? What are the implications for retail investors? I believe those shares were taken by short sellers - Einhorn, Weiss and Yu. This deprives retail investors of the ability to hedge their long positions. I saw the same thing in U.S. Steel (X). When the shares became unavailable to retail investors, X plummeted from $28.80 to 17.67. The lesson here is not to cover, if you need to hedge your long position. The alternative is to buy puts. What say you?