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An associated qn is what price GME would issue new stock at if such a deal took place? higher/ lower/ current stock price? Suppose lower. Unlikely. Because a b
by challenger-derp 6y ago
An associated qn is what price GME would issue new stock at if such a deal took place? higher/ lower/ current stock price?
Suppose lower. Unlikely. Because a better price for GME to raise capital exists -- the current stock price.
Suppose at (approx.) current stock price. Possible. But what's in it for GME to offer such a deal to shorts instead of offering it to stockholders? Suppose offer to stockholders, then shorts still have to cover and thus potential of short squeeze remains (which is beneficial to future capital raises). Now, suppose GME offered it to shorts, squeeze is extinguished, the rally fizzles, stockholders who propped up GME's price feel betrayed. At offer to raise capital at current stock prices seem better placed with stockholders than shorts.
Suppose higher. Now we might be on to something. Without GME's offer, the shorts have to close out huge positions by buying from the secondary mkt -- short squeezing the price up and making future purchases to close remaining short positions increasingly costly. Shorts don't want this. Shorts would rather close by buying shares at a higher, _constant_ price (constant means not subject to squeeze). GME, if desperate for capital, could extend an olive branch to shorts with a deal that says, hey, I'm offering n stocks at a 75% premium to the current price of $400, wanna take it?