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Comment by PragmaticPulp | Hacker News Reader

Your argument relies on the assumption that hedge funds haven’t been margin called, and that they haven’t closed their early short positions. Many funds have claimed they closed early shorts.

The piece people seem to misunderstand the most is that total short interest won’t tell us if specific shorts were closed out. New shorts can replace old shorts at the higher price.

It’s like arguing that nobody could have lost their job or got a new job because the national unemployment rate was unchanged. Aggregate numbers don’t tell us about specific shorts.

Is it really so hard to believe that people would want to short the downside of an obvious short-term market bubble?

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Yeah. I find it hard to believe that any serious money is shorting anything remotely close to a meme stock right now. Who the hell would want to risk their career on a trade with infinite downside when it seems like the prevailing market sentiment is crush the shorts?

Don’t forget that this is a market where most people believe TSLA is vastly overvalued.

There hasn't been enough volume for the shorts to be closed.

Why do you say that? The total free float is about 47M shares; I understand short interest was about 150% of float but volume on GME last week was over 500M, wasn't it?

Shorts covering is expected to move the price way more that it has. That 500m vol is people/algos trying to profit of intraday movements keeping the price relatively stable (for GME)

You have literally no way of knowing that.

A hedge fund covering a short pays exactly the same price in the market as a meme-following Redditor or an intraday trading algorithm.

On the contrary, as the gap between the current price and the range everyone knows it will fall to eventually grows, the stock is becoming more and more attractive to short to people with "serious money" and a little appetite for risk.

Meme stock just makes it look more like a huge opportunity on both sides and in the long run everyone knows which direction it goes from here so the opportunity is clearly more on the short side if they size their position so they can hold it long term. Even if there is the chance for further squeeze, I'm sure enough people will still feel this is a huge shorting opportunity that short interest will not go down much from here, and the higher it goes the more people will feel that way.

The share capital of the company isn't fixed... The company could issue more shares, and invest the money raised, turning the business around.

That wasn't a possibility before, but it is now. Given that, I don't think "the range everyone knows it will fall to eventually" is a foregone conclusion.

They're not in a promising sector and there's nothing to suggest raising a bunch of money is going to allow them to turn into the kind of company a market cap of $20 billion suggests.

But if they could raise $1 Billion by selling 5% more shares, they could pivot into an entirely new sector using some of their existing assets.

For example, they could make an online gaming platform using their relationships with game studios, or they could move into 'gaming cafes' using their retail space, or start designing games themselves using their storefronts for marketing.

Sure that could happen, but it's just as likely as giving anyone a billion dollars and expecting them to become a company that justifies a $20 billion valuation very quickly. The timing is important too because at the end of a mania like this that is entirely based on a quickly rising price, as soon as enough people decide this isn't going to continue rocketing up, there will be a rush to take their profits or to stop their losses.

Considering how unpleasant it is to talk to a GameStop employee (they upsell you on like 5 different things a purchase), starting a business where people stay longer and talk to them more doesn’t sound appealing for the customer.

they could even become a hedge fund !

> The company could issue more shares, and invest the money raised, turning the business around.

It’s a retailer that sells video games. They’re not going to turn it around while Steam, PlayStation store, Amazon, etc exist.

With enough capital, they could retool and and do something completely different, like setup a network of local-market-optimized ghost kitchens (or some other completely different business model responding to current opportunities that has nothing to do with what GME does today.) It’d be potentiallty more expensive than building a similar operation from scratch, but if them using the stock price to capitalize doesn't immediately collapse it instead of providing them money (which, to be fair, is far from guaranteed) it's free money that a new business trading on its business plan and not someone else's market manipulation games wouldn't have, so why not?

> The company could issue more shares

It could, and GME trying to capitalize based on insane stock performance would be a real test of nerve, because it's one thing that could focus the news off the WSB vs institutions narrative and back on the business fundamentals of business, which still suck.

Maybe it works, maybe it just collapses the whole house of cards.

The game has gotten sufficiently big enough that long-sided whales haven entered and are snapping up shares and abosrbing short attacks. See the long buying at Friday market close, institutional volume aimed at boosting close price to inflict pain on short via higher maintenance margin.

The shorts are in a corner now, their positions are underwater on paper and long whales have an incentive to keep it there.

1. Even if some shorts are in trouble (you don't know whether or not it's the same people as at the beginning of the run), others are willing to take their places.

2. Long whales also have plenty of incentive to sell. Namely they can bank their profits on a stock that is likely to collapse quickly

I mean, I'm not willing to risk my money on a short (and I wouldn't recommend anyone else to either), but I would be intensely surprised if the stock is not below $50 at the end or February. If the current price is north of $300, and holding costs on a short for a month aren't too bad, there's like $200+ of movement there to capture. Pump and dump is going to dump at some point. The market can stay irrational for a long time etc, but I suspect that's less true when everyone knows it's being irrational.

I'll just leave everything in my three-fund portfolio though, cause boring is the right fit for me.

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