Daniel Drew's 1866 Erie Corner Defense

In the spring of 1866, Daniel Drew found himself on the wrong side of a squeeze in Erie Railway stock. He had sold short heavily, but the market was strong and shares grew scarce as buyers kept accumulating, pushing the price up toward 95 and threatening to trap Drew in a corner of his own making. Rather than get squeezed, Drew used his position as Erie's treasurer: in exchange for a loan to the railroad, he had received 28,000 shares of unissued stock and 3 million dollars in convertible bonds. He converted the bonds into another 30,000 shares, and dumped a combined 58,000 shares onto the market at once to meet his short obligations. The flood of new supply was more than the market could absorb — Erie collapsed from 95 all the way down to 50, wiping out the traders who had been sure they had Drew cornered.