TLDR: This is currently a war between funds. Your 1.41 shares don’t move markets, you little fractional bitch. But if you sell at a loss right now, you’re literally just giving them money like a fucking idiot.
Disclaimer: I am not a financial advisor, nor am I licensed or in any way qualified to dictate or advise your trading decisions. I don’t know jack shit about fuck. This is not financial advice. This analysis is not meant to influence, inspire, or inform you regarding your trades. This analysis was written purely as speculation and could be entirely incorrect. I found my own analysis interesting and wanted to share my unprofessional opinion. Furthermore, while these numbers are accurate as per their sources, they may not account for other factors that relate to the stock’s activity. I own shares of GME.
Background: GME is owned almost exclusively by institutions and funds. https://finance.yahoo.com/quote/GME/holders/
The combined top 10 institutions + 10 funds own 88.93% of the shares. I don’t know what the fuck 122.04% of Shares Held by Institutions means (may have the do with the made-up shares fuckery, but I’m not going to get into that). The point is, institutions and funds own almost everything, retail owns almost nothing.
GME was already heavily shorted by late 2020. Likely more than 80% of those shorts occurred at $4 or less.
Late 2020 Short Interest Data sourced from Capital IQ: https://imgur.com/a/6lH0nx5
Note on shorts: When you short a stock, you have to pay interest DAILY on that stock at the CURRENT PRICE. If the stock’s price decreases, you will likely make more money from the decrease than you will lose from the interest. When the price increases significantly, the daily interest may eat at all the potential profits you were hoping to make.
Early 2021 Short Interest Data sourced from Capital IQ: https://imgur.com/a/BlQDgI4
As you can see above, in late January, the price of GME kept rising, and it likely became unprofitable/risky for these short sellers to continue holding their short position at these prices. They likely knew that the price was eventually going to go down, but it must have cost them a fortune on a daily basis to continue holding. This leads to some of them trying to cover their shorts, which led to the price rising even further, which led to others trying to cover their shorts, etc. Combined with retail mania, this is what created the “squeeze.”
So the short interest goes from 102.08% to 88.58% and the price went from $35.50 to $347.51.
Now, we know that the shorts were NOT covered. I refer to this excellent post here as to how it’s basically mathematically impossible for them to have actually covered: https://old.reddit.com/r/wallstreetbets/comments/ldjbg1/analysis_on_why_hedge_funds_didnt_reposition_last/
But there’s another simple reason why the shorts weren’t covered:
Who the fuck is going to leave their money with a fund that loses 53% of assets in a single fucking position? The ultra-wealthy whose assets these hedge funds manage would all immediately withdraw all their fucking money and sue for breach of fiduciary duty.
Melvin may have told the media that they covered their shorts, but I guarantee they fucking called every one of their clients and told them they hadn’t covered, and that they had a new plan. Get an injection of cash from Citadel and Point72 ($2.75 Billion) to pay the daily interest rates on their shorts, and run a FUD media campaign against these retail morons to sell and tell them that the squeeze is already over – while Melvin waits it out. “The shorts have been covered, anyone left holding the bag is a fucking moron.”
So what’s the current situation?
1) Team A Hedge Funds: These are the morons who shorted the stock at $4 and below and are currently bleeding. Some of them definitely covered and exited, but it’s mathematically impossible for all of them to have covered. These are the REAL BAGHOLDERS. They literally lose money every day that they hold the short as long as the stock is over $4. They need the price to go down to reduce their daily bleed. They need to buy to stock back eventually to stop bleeding or reduce the price to $4 or below again.
2) Team B Hedge Funds: These are the sharks who sensed the blood in the water and shorted the stock as it was rocketing up. They hold shorts likely in the $150-$450 range. On paper, they have made a fucking fortune and are planning their next move. They love these currently “low” prices and want to buy back the stock and cash in their profit, but they can’t do so too quickly without shooting the price up again and losing that profit margin. Because they shorted the stock, they are also bleeding. They will need to buy these stocks back eventually, before their profit goes to nothing (this could be a long long time).
3) Team C: Institutional Holders and Fund Holders: These guys basically hold all the shares that Team A and Team B Hedge Funds want. They’re currently sitting on massive paper gains and want to squeeze Team A and Team B for every cent they have. They know Team A and Team B are bleeding, and that they must eventually buy back the stock (especially Team B since Team B wants to actually realize their profits). They’re comfortable sitting on their profits, but they’re also very comfortable bleeding these guys out knowing they have to buy back, and they can wipe out a competing fund in the process. They are also very happy if there is another squeeze because rather than sell 5 shares, they would love for the price to jump 500%, sell 1 share, keep 4, and continue bleeding Team A and B.
What’s happening right now is that there is a war being waged between these three groups. Do not underestimate the people who work at hedge funds – they are extremely intelligent, extremely greedy, and extremely competitive. If a retard like me can dissect the situation, they all have certainly figured it out as well. What’s happening right now is they are trying to find a market equilibrium price without giving away their positions. Team A wants to cover, but can’t seem desperate or else the price will skyrocket. Team B wants to “cover,” but can’t seem greedy without eating into their profits. And Team C wants to sell and realize their profits, but they can’t all do it at once without tanking the price.
And you, my paper handed fucking mongoloid friend, when you buy high and sell low, you literally throw your fucking losses into this pool for these three to fight over as they try to minimize their losses/maximize their profits.
The short interest is still massively high and this story is just beginning. This is not the end, despite the FUD and the shilled pessimism in WSB. Will it hit $300 again? Maybe not. Will there be massive volatility as they duke it out and the opportunity to break even/profit? Yes.
This is not financial advice. I am not telling you to hold. However, you have already paid for your ticket to this show, think about maybe sticking around for the ending.