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I'm not sure they are. But, if they are wrong, it would likely be because of a handful of things. *All the below are hypothetical scenarios, I have no specific

I'm not sure they are. But, if they are wrong, it would likely be because of a handful of things. *All the below are hypothetical scenarios, I have no specific reason to suspect any of them will or won't happen. This is not financial advice. Trade at your own risk. 1) Hedge funds may have been buying GME alongside WSB. Once the shorts stop out, the funds will know before WSB does. And get out ahead of them. The size of the position suggests this is a possibility. 2) GME management will announce an equity offering. This is arguably the economically/financially correct thing to do. And is also aligned with management's incentives. With more shares in the market, the shorts would no longer be squeezed. 3) GME has become too volatile to easily manage counter-party risk via daily margin posting. This makes options and cash equities much harder to transact. Which is what we saw yday. This could limit the ability of non-professionals to access the market. Killing the squeeze. 4) Robinhood could face solvency (or the perception thereof) issues. This could cause a rush to close out accounts while people still can. Generally, even having to deny you have a liquidity problem is a bad sign. 5) Some truly massive player or a group of them (Citadel and Melvin are only middle size fish) will come in and crush the longs. Gamma works in both directions. 6) The index funds that currently hold the stock will make an exception to their usual rules and sell it because the market is so clearly dislocated. Or alternatively the providers could kick out GME. This would again significantly reduce the squeeze. 7) The regulators will set the stock to liquidation only. The exchanges have the power to do this. And this is the sort of situation that said powers are contemplated for. So there's quite a bit that could potentially go wrong. And so a good chance that the squeeze participants could lose their investments. Part of the problem is that it isn't clear just how large the short positions really are at this point. While I have zero sympathy for the hedge funds on the other end of this trade, if you live by the sword you die by the sword, the regulators may decide this presents a systemic issue. In which case they're going to shut it down.

excitednumber 6y ago
2 would be the best option imo. Mgmt would be silly to not although this is all so emotional and not political that they'd be skewered.
fileeditview 6y ago
I don't see 2) happening when it would actually bail out greedy traders that shorted GME like crazy in the first place (with the obvious intention to run it into the ground, regarding the short interest of ~140%). It is however very interesting how all this plays out and I think many people will have learned a lot afterwards.
- Jackson12 6y ago
  It wouldn't exactly bail them out. It would in effect crystalize massive losses. And, were I asked to advise the GME board, I would tell them it's in the best interest long term of the company at this point (because it is). It would also have the benefit of effectively cashing out all the GME longs at once. Otherwise, there'll be a frenzy on the way out the door, and the most connected/sophisticated people will beat the retail traders. Also, you can't run a company into the ground by shorting it. A firm's stock price has no inherent effect on its day to day operations. There are plenty of operating companies that are bankrupt. Equally so, GME doesn't benefit from the run up in its stock price at all. The only time the market price actually effects a company is when its time to raise or return capital. So the only way GME will actually benefit from this episode is if it sells stock.
  - excitednumber 6y ago
    The idea that the board approving the sale of shares at this massively overinflated price "bails out the shorts" ignores what duty boards and companies have to shareholders. Gamestop selling shares at this price would, all else equal, be the best thing for gme to do for the company's future prospects. That being said, I don't know who was long by accident going into this (eg an investor who saw gme as a value or deep value investment) who didn't already sell because this is the accidental win of a lifetime.
  - fileeditview 6y ago
    Wouldn't you make the company e.g. more vulnerable to a hostile takeover by running the stock price into the ground? As mentioned in many threads there was no inherent reason to think that GME would bankrupt any time soon. I agree that GME don't really benefit by the current stock price. However the benefit from the publicity for sure. What would they lose by sitting this out? It for sure be better for their image than creating "a way out" for the traders sitting on their shorts. You say the will still pay a price.. sure but what price they will pay if GME does nothing is still open. TLDR I am not convinced that this would be their best play. It at least would have a massive loss of image for their customers(many of which currently are invested).

excitednumber 6y ago

2 would be the best option imo. Mgmt would be silly to not although this is all so emotional and not political that they'd be skewered.

fileeditview 6y ago

I don't see 2) happening when it would actually bail out greedy traders that shorted GME like crazy in the first place (with the obvious intention to run it into the ground, regarding the short interest of ~140%). It is however very interesting how all this plays out and I think many people will have learned a lot afterwards.

Jackson12 6y ago
It wouldn't exactly bail them out. It would in effect crystalize massive losses. And, were I asked to advise the GME board, I would tell them it's in the best interest long term of the company at this point (because it is). It would also have the benefit of effectively cashing out all the GME longs at once. Otherwise, there'll be a frenzy on the way out the door, and the most connected/sophisticated people will beat the retail traders. Also, you can't run a company into the ground by shorting it. A firm's stock price has no inherent effect on its day to day operations. There are plenty of operating companies that are bankrupt. Equally so, GME doesn't benefit from the run up in its stock price at all. The only time the market price actually effects a company is when its time to raise or return capital. So the only way GME will actually benefit from this episode is if it sells stock.
- excitednumber 6y ago
  The idea that the board approving the sale of shares at this massively overinflated price "bails out the shorts" ignores what duty boards and companies have to shareholders. Gamestop selling shares at this price would, all else equal, be the best thing for gme to do for the company's future prospects. That being said, I don't know who was long by accident going into this (eg an investor who saw gme as a value or deep value investment) who didn't already sell because this is the accidental win of a lifetime.
- fileeditview 6y ago
  Wouldn't you make the company e.g. more vulnerable to a hostile takeover by running the stock price into the ground? As mentioned in many threads there was no inherent reason to think that GME would bankrupt any time soon. I agree that GME don't really benefit by the current stock price. However the benefit from the publicity for sure. What would they lose by sitting this out? It for sure be better for their image than creating "a way out" for the traders sitting on their shorts. You say the will still pay a price.. sure but what price they will pay if GME does nothing is still open. TLDR I am not convinced that this would be their best play. It at least would have a massive loss of image for their customers(many of which currently are invested).