If everyone bets on a short squeeze, someone has to hold the bag. VW did spike to 1,000€ in '08, but it also dropped hard again. So, the short sellers need to cover, they realize insane losses, return their shares back to the lender and then what? The lenders just keep them or do they sell themselves and realize as much profit as possible?

I wonder if most of the WSB people actually time this right and find an exit on the peak, because that is the implicit goal if you bet on an infinity short squeeze.