High Short Interest Stocks
highshortinterest.com
highshortinterest.com
Heavily shorted stocks tend to be the companies with the most negative cash flow shocks[2], low quality earnings statements[3], negative earnings revisions, and future bad news[4]. In other words, when a company is heavily shorted it's almost always for a good reason. (Like being a brick and mortar video game retailer, that's losing mountains of cash with no turnaround plan.) High short interest is a tell-tale warning of a bad investment.
This shouldn't be surprising. Research has consistently found that short-sellers are the most sophisticated and well-informed investors in the market[5]. There activity strongly predicts soon-to-be released negative public announcements[6]. Short sellers are exactly the type of trader, you do not want to be on the other side of.
[1]https://onlinelibrary.wiley.com/doi/abs/10.1111/0022-1082.00... [2]https://www.sciencedirect.com/science/article/abs/pii/S03044... [3]https://link.springer.com/article/10.1007/s11142-006-6396-x [4]https://onlinelibrary.wiley.com/doi/abs/10.1111/fima.12144 [6]https://www.newyorkfed.org/medialibrary/media/research/confe... [5]https://onlinelibrary.wiley.com/doi/abs/10.1111/jfir.12121
Which other automaker does that?
Edit: Having said that, I bought them long ago at their IPO price and sold long ago when they were around 300 pre-splits. The current valuation is indeed a little risky.
1) still has a lot of scaling to get through before they reach anything close to the sales volume of their competition. Elon talks a lot about scaling but Tesla is still microscopic compared to other manufacturers. The business operations of a much larger company will present challenges in communication, structure, quality assurance, legal liabilities in various jurisdictions, not to mention the struggle of sourcing battery components. Tesla scaling is not as easy as spinning up additional Kubernetes pods.
2) The competition WILL electrify. Tesla is not likely to have more than 6 models in the coming years yet they will compete with hundreds of models from different companies that cater to different niches. Any company that offers an electric vehicle with physical buttons instead of a touchscreen has my attention.
3) Tesla workers will unionize and/or mature away from the company. I grew up around Detroit and witnessed a lot of labor dynamics with the UAW. Assuming Tesla succeeds in preventing a union the workers will eventually cash out their stock and leave for better offers at other automotive companies or spin off their services into tier automotive groups. Why write software for Tesla robots when the robot company will hire you to write software for all auto companies?
Also, they're an energy company too, which means at least some of their speculative valuation is in energy, which is a totally different market.
Really, it's priced higher because people like the brand, even if it's run by someone easily distracted who used shareholder money to bail out his cousin's solar business who goes around making 420 tweets, and that's when he's not calling people pedophiles. Oh, and their hubris kills people.
Killing people comes with manufacturing automobiles. Takata airbags and other "cost cutting" disasters, selling cars that can go 300+ km/h which can't be legally driven at that speed anywhere except race tracks and German autobahns, making safety features such as seat belts, side mirrors, traction control etc. optional until the government regulators have had enough deaths and mandate it...
Eventually, of course, if a security keeps only going up, this mantra will become true. The point is that sometimes, a bet that seems like a sure thing will blow up spectacularly. And that not everyone who takes such a bet is obviously wrong.
Piggly Wiggly short squeeze story: https://twitter.com/dollarsanddata/status/135456144478064640...
Back in 1999, people weren't very hot on Amazon.
https://www.thestreet.com/opinion/net-stock-horror-stories-r...
Let me ask this.
How in the world can an 'analyst' know more about tech than the people that work all their lives in bleeding edge research and technology?
They don't. They don't know more than Jim Keller whose primary task was development of Zen architecture at AMD - which traded at $5 before he joined and until after he was done.
Why do I mention Jim Keller? Because a certain class of people can not only turn around a company, but whole industries even if only due to being famous and drawing unknown talents.
In the case of TSLA; Andrej Karpathy leads the AI division.
My argument is that 'analysts' know nothing of tech and they are in no position to act as the judges.
How much did you need to know about tech to realize that wasn't going to happen?
Sure 'end of next year' may be impossible, but doing it at some point is not necessarily impossible given certain conditions.
Nothing to do with targets, everything to do with values. And a company is more than what it produces, it is also the patents they own and the brains they wield.
PS: I do research in ML.
A valuation of 20 times revenue - and thousands of times earnings - is not justified by saying "a company is more than what it produces".
Edit: put otherwise, how does your comment relate to the fact that Tesla was trading at 5-10% of the current price in 2019? Aren't the patents and brains the same? Why are Tesla's patents and brains worth now almost as much as those of Apple or Microsoft?
"At an altitude of approximately 45 km (24 nautical miles), the boosters separate from the orbiter/external tank, descend on parachutes, and land in the Atlantic Ocean. ... They are recovered by ships, returned to land, and refurbished for reuse."
You say short sellers are using fundamentals as an ‘excuse’ to short stocks ‘they don’t like’. If not from careful analysis of the business, where should the opinions come from?
Even if you took it for granted that GPU-powered deep learning was the next big thing, it wasn't obvious that NVIDIA would be the dominant player. CUDA made GPGPU programming easy at the time, but any other manufacturer could have released something better. It just didn't play out that way.
Alexnet was 2012 by the way. Shortly after Nvidia stock tanked!
Many analysts do. Some don't. They all tend to cover several names, and each name has some analysts who are more influential than others. The influential ones aren't exclusively found at prestigious investment banks, either. One of the most influential analysts for AAPL, Dan Ives, works at Wedbush.
Technology experts are often clueless to a fault and don't have some kind of "third eye" for business, any more than business experts have a "third eye" for technology.
It's also a mistake to think that just because a person is familiar with one technology, he/she understands the demand for that technology -- let alone other, weakly related technologies.
> 'Fundamentals' and all that is a bs excuse used to scapegoat driving stocks they or their friends don't like to the ground.
I agree with this in the case of GME and AMC, but in other situations fundamental analysis can help a person to understand valuations. It seems like BS until you actually find yourself carrying risk and trying to figure out how much a stock should be worth.
Fundamentals shouldn't play much of a role for valuing companies that are at risk of default or bankruptcy, because the stock prices the long-term EV of a binary outcome: either the equity value approaches zero or it doesn't. People who think they know what GME stock is worth, but haven't sold any shares short, are just pontificating and they should either put their money where their mouths are or sit on the sidelines and watch with fascination like the rest of us.
Engineers* quit as part of their remuneration packages are stock options.
Overall perception and morale, hard to acquire new talents, etc.
A few lucky Redditors will get out with profits. Most of the late entries are going to take steep losses. Those losing Redditors will be paying the winning Redditors.
The narrative that this is hedge funds losing to Redditors isn’t fully accurate.
https://www.reuters.com/article/us-retail-trading-shortbets-...
The hedge funds aren't structurally important. Brokerages start to be. Retail banks definitely are.
There are a lot of people under the age of forty who don’t feel like they are benefiting from our current system. When the Boomers hit age 35, they owned approx. 21 percent of the nation’s wealth. Gen X plummeted down to 9 percent. Millennials are on track to own about 3-4 percent. This is according to the Fed.
They make less, own less, don’t see themselves or their interests represented at the highest levels of our government, and are fed up.
So, yes, the young would suffer more than the wealthy, the elderly, and the connected in an economic collapse, but they don’t seem to care.
Both are right to a large extent, and both are slandered as evil/racist/etc. by the other side.
> Ortex said the figures are based on the change in trading prices between the start of January to Wednesday’s close, and the number of short positions.
The shorts might be down 70 billions, but won't most hedge funds hedge their position with something more complex than just a short?
That's a lot of assumptions, though.
Some hedge funds are going to make bank on this.
I bet there are some much more experienced reditors behind this and a lot of the useful idiots will lose $$
You should watch Roaring Kitty's video from June 2019 I believe (maybe its 2020?) on YouTube about this. He goes into great detail, with something like an hour of analysis on why $GME is a reasonable investment.
Remember also, Dr. Michael Burry was buying into $GME (it was 5% of his fund in fact). Other big institutional investors like BlackRock, etc. had major positions as well.
Honest question: do you really think that rational analysis of the viability of a stock is relevant at this point?
It seems to me that gme just happened to end up being the battlefield in which the wsb people acted
A rational forum would be everyone marvelling at what was already pulled off, not this free-for-all where everyone's pretending there's a big battle going on right now and pretending there is anything to gain left.
If you see regularly someone’s name on the front page of the New York Times you might infer something about them. If you see someone’s name in the phonebook that is less interesting as (ok, not actually true but hopefully you get the point) everyone is in the phonebook. BlackRock is the phonebook.
It's from 2020. I just want to add that he's humble about his analysis too. He explains his case in a lot of great detail and still writes "bullish on gamestop, perhaps foolishly so".
It never should've been shorted as much as it was without hedging the other side of the bet. What was Melvin going to do if GameStop found a way to be wildly profitable in e-commerce?
This is fundamentally terrible risk management coming back to bite people in the ass. This time it was a Reddit internet mob but it could've been anything.
For people wondering, "Well why didn't some behemoth like Sequoia Capital or BlackRock just swoop in and load up?" When purchasing such large blocks of a company, 5%, 10%, 15%, etc., there's a lot of paperwork involved.
Retail investors don't have to file with the SEC when they YOLO $200,000 on GameStop at $4 a share. They can shrug and say, "We like the stock."
But aren't stock prices almost entirely about future performance? So will GME's business model work tomorrow?
I think the answer is yes. They're the best option for buying used peripherals that I've found. I can get it right away, can exchange easily if a problem and can see the item before I buy (or at least when I pickup).
I've just wasted too much time trying to see through the Amazon reviews gaming, do what feels like national security background checks on eBay sellers or go through the hassle of FB marketplace.
Maybe it's just me, but as a casual gamer and fan of legacy consoles, I like shopping at Gamestop. Whether online with "at the door" pickup or in the store. The locations around me have employees that seem genuinely happy. Maybe they're good at hiding their misery.
If Gamestop would expand into more hobby shop items, it could really take off. Board games, miniatures, etc. And why don't they stock energy drinks (my locations don't anyway)? Post-pandemic add small cafes with rentable game systems. I think people will be desperate for actual human interaction once that's possible again.
Finally, with this ongoing retail apocalypse maybe their leases will get cheaper.
Yes, and that's sort of Roaring Kitty's point in that video. He interpreted the negativity about it as being way too extreme for the financials of the company. It was basically saying the company was going to fail tomorrow, whereas his analysis said to him that it still had several reasonable years ahead of it which the share price didn't reflect.
This depends on what kind of investor you are. Do you believe the market is entirely rational and depends on the underlying fundamentals of a company? Or do you believe that the stock market is ultimately irrational and trades solely on hope and fear?
Frankly, I don't see how anyone can disagree that the market is entirely irrational and solely emotionally based, and the reason is because humans are irrational and emotionally based. We rationalize our positions after we've taken them, not before, I'm totally convinced of this, mostly thanks to Sam Harris, and to a lesser degree, Richard Dawkins.
We want to believe that we logically poured over the facts and figures and we arrived at the only inescapable conclusion possible. Were that true, everyone would arrive at similar conclusions. Despite what some people have said the past several years, there are no such thing as "alternative facts". A thing is either true, false, or unknown.
Smarter people than I have made cases on both sides of this argument, but for me, I see it happen every day, all the time, all around me. I watch it happen in finance. I watch it happen in book publishing. I watch it happen in development. I, for one, am a believe in what I call the "emotional market hypothesis". Hell, Tesla is a perfect example. There's absolutely no reason for a stock to be trading at 1660 times its earnings, but Tesla is. That's its Price-To-Earnings ratio right now. The stock is fueled by hope. Elon is the personification of that hope, for better or worse.
This is a flash in the pan.
And don't get me wrong, I almost always support the underdog.
The troubled melvins and maples are exiting succesful positions to be liquid and cover for the black hole that is GME.
Probably some of the early WSB pumpers have quietly sold while yelling at the community to hold, too.
However, we should always be careful with unrealized gains and losses. Those aren't confirmed until people exit their positions.
I read a suggestion that it’s not the price of the stock that scared the hedge fund. But the borrowing costs, where the interest rates might have gone as high as 80%!
That’s quite an expensive credit card there to be shorting stocks with.
An obviously that's only to a point. If you get into this late you are definitely more likely to get burned. But it's clear some of these people genuinely seem to care about "wrecking hedge funds" as much as anything else.
I believe in normal circunstances it tends to be less than 1%
I have no clue how anyone, especially edge funds, could get majorly impacted by just one stock moving the wrong way.
I have stocks in my portfolio that move 25 to 50% the wrong way almost everyday and I still get about 1% overall gain daily in this bull market (which is probably not great in this economy).
Only fools stay short for a long time. Fees, theta, and margin interest will eat you alive.
Plus there's the near infinite downside if you're wrong.
Fantastic thread on shorting:
If that's the case then yes, you don't want to be on the other side, because they're manufacturing their desired outcome.
"Past performance does not guarantee future returns", and vice-versa.
That's a somewhat trite statement (albeit technically true), but it's particularly relevant here where people are betting on disruption. The "concept" behind this movement is that one can influence stock performance through collective action by taking decisions that would not have been taken in the past (for very obvious industry reasons, like those given in your comment).
It's a high-risk bet for some, but noone is going into this hoping for a return based on traditional market performance.
Yes, a lot of the companies who get heavily shorted stumbled. But then, to guarantee a profit, the shorting hedge funds knee cap the company. Then they short them again and again. The current fiasco also shows the widespread influence these firms have to enact their will on the market.
If you look at the stock market as independent number generator, you'll always use statistics to explain what's going on. If you realize there are humans behind those numbers, you see it more like a crime scene rather than a math problem.
In 99% of cases you don't want to take the other side of the bet against these big funds. They could be right and the company is actually a loser, or they could just have way more money than you and the market will never reflect anything but their perspective.
GME is a really fun ride (and I'm rooting for the WSB crowd) but it is a result of a uniquely heavily shorted stock and an even more unique groundswell of popular interest.
Also, is this page correct in saying that GameStop is the only stock on all listed US markets that's shorted over 100%?
The one thing not really being explained enough is that short interest as reported through the exchanges is reported bi-monthly. You can imagine that with current events that is an eternity to wait for the next update.
I worked at one quite some years back.
For US public equities, dark pools are still required to print all trades to the public consolidated ticker. They hide potentially huge volumes of hidden orders waiting in their order books, but they don't hide actual position shifts (trades).
[1]: https://en.wikipedia.org/wiki/Interest_rate_swap#Extended_de...
For a slightly fictionalized version of why these might be useful in the real world, let's say a Finnish life insurer is selling life insurance in Hungary. So, they're doing their accounting (the numerare) in Markka (FIM), taking in payments in Forints (HUF), and exposed to changes in Hungarian mortality rates. So, for the next 30 years, this insurance company wants some secondary protection against adverse shifts in the Hungarian mortality curve, but to make that insurance less expensive, they only want protection if those losses in HUF, converted to FIM exceed 100 million FIM.
So, this insurance company goes to the structured products desk of large multi-national firm and gets a very bespoke option created. The multi-national sells this single contract to the insurance company, and hedges the individual FX components using FX options and the actuarial risk with actuarial derivatives. There's basically no market for this stuff, so the large multi-national basically commits to hedging out the other side of this contract for the next 30 years.
I've worked with optimizing risk modeling for exotics, because it turns out that for some of the more complex exotics, the daily computational costs get very expensive for basically re-calculating a first-order multidimensional Taylor approximation (the risk components) of these contracts. Every day, we then take these risk calculations and buy/sell a bunch of simple options to bring the first-order partial derivatives (risk components) back close to zero.
But, I don't really know. I know a bit about making the computers go fast, and I talked with the structurers enough to know very generally what was going on.
Funny story poking around exotic financial models: a big part of the collateral a shipping company can offer is its ships. I saw "cape size" show up in a model for the value of a ship, and imagined ships dressed up like Superman or the Green Lantern. It turns out that for the same carrying capacity, ships that are dimensioned to fit through the Panama and Suez canals are worth significantly more than those that are forced to round the Cape of Good Hope or Cape Horn ("cape size").
Don't misconstrue this as investment advice, but be careful about taking the short side. If you happen to randomly be short Hungarian lives, and genocide breaks out, and you make 3 billion dollars out of pure happenstance, there will be double-digit percentages of the population believing in conspiracy theories about you for hundreds of years. Very few people will want to live in the same city or even sell a hamburger to the alleged architect of the Hungarian Genocide. This isn't investment advice; it's life advice. It's possible to be 100% right, for the wrong reason, and lose 1000%.
It seems crazy to me that we have two bands of people warring over fake money in what could only be equally illegal ways.
That’s not how it works. Votes don’t magically appear.
The lender gives their voting rights along with the stock to the short seller. The short seller gives it to whoever purchased the shares from them. So only the final purchaser gets to vote, the original lender lost their rights while their stock is lent out.
A bunch of shares are shorted, and the company announces a vote on something, which causes people to recall shares that they've loaned out (because they want the voting rights).
Some things don't change.
I won’t pretend to fully understand this but the analyst answered a lot of FAQs on this data on his Twitter: https://mobile.twitter.com/ihors3
What differs in this data: “S3 data is shares shorted, our competition's data is broker stock borrows. Problem is, stock borrows do not equal shares shorted. Stock borrow includes financing trades, broker to broker transactions but does not include all internal rehypothication used to cover short sales”
If you buy a random share, there's a 55% chance that share is currently loaned out and a short-seller has to buy it and give it back. There's a 55% chance that share the short-seller buys is currently loaned out... A single share purchase cascades into 2.2 purchases on average.
If any sizable fraction of shares held are committed not to sell, that math gets way worse.
Shorts have finite payoff for infinite risk. If you buy into shorts when the interest is above 100%, you _immediately_ open the door for this type of counter position to become rational.
Is it really a problem that a bunch of people on a message board collectively decided to act on a rational position?
EDIT: This is the story: https://www.cnbc.com/video/2021/01/27/melvin-capital-sells-o...
It's full of plausible deniability phrases like "from what I understand" and it's very much a game of telephone. They could easily say "when I meant we were out of the stock, I meant that we had covered some of our positions" or similar.
I can't find a non-hearsay source anywhere, neither written nor in the form of a recorded interview.
I’ve yet to find an actual statement from Melvin.
Perhaps I'm naïve, but I think to lie about such a thing would pretty clearly fall afoul of the law?
A single false statement or two, said to a reporter as a confidential source, would be much more difficult to prosecute. The reporter might not willingly give up their source, and the company could deny everything, fire the person who "inaccurately represented our position", and claim the party acted of their own volition. Modest fine, at best.
Most of what WSB is doing is market manipulation but from what I've read it isn't something the SEC will go after in court as fraud is not clearly involved.
This is, unfortunately, going to be a situation where the sophisticated investors win out, and the people they cajoled into buying stocks will be left holding the bag. Gamestop could not reorganize quickly enough to assure investors that they actually have the ability to capitalize on this influx of investment, especially not with a historically terrible business performance.
The above has happened, but it is rare. Not letting your broker deal with holding the stock for you is a big hassle.
They took on unbounded risk and have no leverage if all of the stockholders refuse to sell for anything less.
The stock is less a company than a contract that can be purchased that says the other party has to pay you any price you set (assuming the stockholders are able to hold until the shorts must close their position).
Can the short sellers stay solvent long enough to wait for the price to drop? Short squeezes can last for weeks. The answer is already no, at least some of them cannot, e.g. Melvin Capital
It doesn't necessarily take a bunch of people to make the price move up, but it does take a lot of money, enough to capture most of the floating shares of stock. And in particular these folks banded together to use call options to amplify their money (and risk) as they purchased stock to drive the price up.
The only thing new is that rather than a few dozen wealthy people coordinating behind closed doors to use a ton of money to cause the short squeeze, it was a ton of small time investors coordinating in public, plus a bunch of others hopping on board when they saw what was going on.
- huge amounts of short positions at like $5 (months and months ago)
- some people disagreed and went long
- good luck #1 for game stop: some big investors (also months ago)
- good luck #2: activist investor joins board, overhaul seems likely (this month)
- shorts refuse to close position, stock at $15-20 (early this month)
- at this point, short squeeze is apparently likely and the momentum begins.
- 2 weeks later, the escalation catches attention outside wallstreetbets
A lot of long term background that seems key to how things have unfolded in that case.
It's only recently that its caught fire, as you note.
...along with the entire internet. This triggers triggers more margin calls, more gains, and more attention.
It's a vicious cycle and given the liquidity conditions in the market there was enough jet fuel for take off. Now add more media attention, more people finding out about WSB, and you have the mother of all short squeezes.
This only became truly coordinated once the media got involved and was exacerbated more by the brokerage firms shutdown buying.
And to give an idea of just how big this part has blown up: Over the past 6 days, WSB went from 2 million subscribers to 5.5 million.
The problem with GME is it was shorted something like 140% of the available floating shares. If the shorts hadn't shorted the stock so excessively, we wouldn't be talking about GME today, it's what left them exposed to so much risk. The blame lies squarely with the shorts, or the lack of regulations preventing absurdity like 140% short interest.
And people wonder why hedge fund managers with short positions on GME are scared by the squeeze! They will do everything they can to stop retailers buying GME. They got caught naked!
It's just the protest "meme" economy.
How do you think Bitcoins got to $35,000. And GameStop got to $350.
That’s why I don’t get why they are being made out to be some kind of evil geniuses/idiots.
It’s very standard stuff.
I won't get into it too much but the first 2 (BB and AMC) have had some material good news lately (AMC got 900M in funding together and bankruptcy is likely off the table, so that warrants a fundamental pop), but the last one is the obvious trap -- NOK has not had any super significant good news lately, and is not highly shorted. It might gamma squeeze, but I think that it's a trap to push retail into so they can actually dump it, so much so that I bought puts on NOK that I was up on (but suffered a bit from IV crush).
I know HN is just getting to this story, but WSB has been dealing with this for the last like... ~2/3 weeks.
This is the biggest aspect I don't understand. People _hate_ Gamestop, the store. But to hear them talk about it on WSB, it's like they were best friends the entire time.
Everytime some one watches something, there goes some $ for the rights, and some $ for the bandwidth. If everyone has lots more time to watch your product, and they do, that's bad for your bottom line. And you can't charge more, because there's tons of options. And internet ad prices were trending down (not sure if that's still true), if Fubo is ad-supported (I can't keep track of all the services)
I agree with OP, streaming is a terrible business and only sustainable if you create your own content. Which is exactly what every streaming service does nowadays
and having more customers gives you more leverage against the right holders since they themselves need eyeballs so they can tell their advertisers how many eyeballs are watching these streams. this allows them to charge advertisers way more.
https://twitter.com/dollarsanddata/status/135456144478064640...
The person who posted one of the earliest bull case research for this (referred to by his YT channel name RoaringKitty or his reddit username u/deepfuckingvalue) has been into GME since last year. He was holding LEAPs (long-dated call options) and shares and has been holding for the last year. He was ridiculed in the original post, because everyone still believed Gamestop was Blockbuster v2. Gamestop is not Blockbuster v2 (I used to think it was), but what's happening right now is not about fundamentals (and if you see anyone arguing that, they are trying to trick you by reframing), it is about the mechanics of a combination of a gamma and short squeeze happening at the same time.
Hedge funds do this kind of attack when they realize the opportunity is there -- you don't hear about it because it doesn't make the news, and because the news makes up a rationalization. Here's an example -- a bunch of stocks that were essentially left for dead (heavily shorted) popped yesterday and the rationalization was retail jumping in. That makes sense, unless you take a second and think about it -- how can the retail that's all still all-in on GME be simultaneously moving huge amounts of market cap of smaller companies? Yes those companies were cheap but they're cheap because they were shorted -- this means anyone could move them. Don't forget that ~90% of all stocks are owned by the top 30% or something like that. Retail can possibly cause gamma squeezes (see TSLA last year), but institutions have to take part for it to go anywhere.
It is 140% the fault of the short sellers that didn't take profit last year (assuming some rode GME from 45 to 5, this is a ~10x position If i understand correctly) that this short squeeze had the chance to happen. Greed got them.
Which ones? The AMC, EXPR and so on?
And it only works on one floor. And a wet Swiffer, once a week, does a better job at picking up the dust.
“In the short run, the market is a voting machine but in the long run it is a weighing machine"
It’s such a cryptic phrase, that I never quite understood it for the longest time, until I came to understand the price insanity of TSLA and Bitcoin. And now GME.
My layman’s explanation is:
People get together to buy a stock, because they believe in it, even against all odds. This gives the stock its value to this nebulous group of people. They are the true believers. They are the voters.
Then the stock price runs high, and has a very high market capitalization. Like TSLA, Bitcoin, and now GME. This is the weighing machine part. This means that over time, the company must deliver on its value, in order to justify that its market capitalization is worth its weight in gold.
So, Tesla the company, has been delivering electric cars and new technology, that helps to justify its lofty valuation.
Bitcoin, has brought the Blockchain idea to the masses. Although I’m not quite sure yet how it maintains its weighing part of the valuation. Maybe its Blockchain system becomes the underlying mechanism of other electronic commerce systems.
And GameStop, if they survive this, can cash out at $1000, issue new shares, and take the money to build itself into a giant e-Sports Gaming company. Or maybe it can even build its own GameStation video game system, to justify its lofty market capitalization.
Or something like that. And also, the initial investors are probably just hoping to ride a rocket ship to riches, and then they hold on for the long term.
Why isn't short trading done secretly?
There’s not a yes/no answer to your question.
That is why the system needs something like a block chain semaphore.
Imagine a company with 1 share of stock floating. Abel buys that share and loans it to Baker (via Abel's broker). Baker borrows the share and sells it to Charlie. Charlie loans their share to Diane. Diane sells it to Earl. Earl loans their share to Fred. Fred sells it to Gary...
As a thought exercise, consider that I can borrow your stock and sell it right back to you short. We can repeat this process a million times. 1 million shares short now based on 1 share.
This is not naked shorting because borrowed the stock from you each time with you willingly participating.
Certificated stock is slightly less fungible than shares of book-entry stock; because I probably want you to return a single certificate with my shares, and you may have to separate or combine certificates which takes time and money. One of the many reasons certificated stock has been on the way out.
That said GameStop is authorized for 300 million common shares and there are only 70 million outstanding according to this table so if their corporate treasury has been at all competent they might be sitting on a huge pile of cash right now.
Make enemies and robbing both your customers and your investors in 1 single move. I don't think there has been anything as foul in history, has there?
Low stock price wont make a company bankrupt, agree.
But if in the process of doing so, you stole value from your own 19yr old stockholders.... then its pretty certain you just painted a bulleye on you. And... They are also your targer demographic customer base. Woops! Lets see how quickly your revenues dip to $0 after that.
If you have $0 revenue you dont have a business. Period.
GameStop has had enough time to do an additional offering. It can happen in a couple of days.
Your timing is off, Hertz was selling shares in the morning, and stopped when SEC called them. They stopped selling promptly, but not before "Hertz Global issued 13,912,368 shares under the ATM Program for net proceeds of approximately $29 million"
https://www.sec.gov/ix?doc=/Archives/edgar/data/47129/000165...
Gamestop already had an ATM offering they registered for in December; I'm awaiting the news of what price they sold at with popcorn at the ready.
When the price is, let's say, 10k or more, then the poor sod having a short position now has a really huge problem. And the WSB people are attempting to do force exactly this - basically, a distributed game of chicken at a world-wide scale with many billions of dollars at stake.
> The company can create stock and sell it if the current holders don't.
That process takes time to set up and exposes the company doing this to image and legal liability - if enough people shout "market manipulation" and file lawsuits, something may stick in the end. Gamestop, AMC etc. will avoid such a drastic step, I believe. Also, there's a side risk of stochastic terrorism in that case, aka one person gambling their life savings away and now going on a "revenge", which is not to be underestimated given how riled up the situation is.
(Disclosure: long AMC, NOK)
If the business does not become profitable, they will keep diluting it to pay the executives and fund the operation till people no longer trade the stock.