There are lots of safe guards in place to prevent an institutional investor from escaping their contracts by Horror Halloween dont scare me I work at FedEx shirt. It's generally mandatory for short sellers to post collateral to guarantee positions. In some cases, the collateral can include a diverse basket of assets that the lender deems stable and liquid enough to guarantee the purchase of shares. I've heard of short sellers that use the cash from the sale of borrowed stock to just buy T bills and then post those as collateral, possibly with some additional assets to provide a margin of safety.
Should the short turn against the shorter with the stock rising sufficiently beyond the value of their collateral, then they'll get margined called by their counter party (either a director borrower or a broker). This will require the short seller to post additional collateral to guarantee the eventual stock sale. Otherwise, the lender will just start liquidating the collateral and directly purchasing the shares they are owed.
