[tikej]

But aren’t the shorts for like 140% of the GME stock? That means if everyone holds with prices, sooner or later the shorters will have to buy ALL that stock anyway at nearly any price to cover for the losses and give back shorted stock.

[foolmeonce]

No one actually wants the underlying stock, so it is really just a bet on the value at the moment they theoretically need to hand over the stock between the parties in the contract.

I think the parties would just be exchanging money in lieu of stock and whoever bought the actual stock will have Gamestop stock, so after the utility for screwing the naked shorts goes away, people who bought in the rush will probably lose just like any other pyramid scheme.

[chii]

> I think the parties would just be exchanging money in lieu of stock

but stocks are marked to market - the lender of the stock will ask back the market value, which if it was being pumped, is going to be high. If the shorts are settled by cash, it's not only not going to make a difference to the bottom line of those shorting, it will also not change the price of the stock.

[treis]

No, because the shorts aren't due all at the same time. Say that 15% is due each day for the next 10 days. On day 1 those shorters will buy 15% of the stock and return it. The people they return it to then can sell it to the shorters that need to cover on day 2. Those people then return it and it's sold to the day 3 shorters and so on.

[bluGill]

Shorts are rarely due at all. If those who hold the shorts have enough capital then they can just hold until the market loses interest, and then cover their shorts at $2. Or better yet, even with a sky high stock price gamestop could be forced to declare bankruptcy by their creditors. If I had shorts on gamestop I'd be looking to get all the companies bonds I could so that when the bankruptcy goes to court I can say I want the company shut down and the judge listens to me. The company could be trading at $1000/share and suddenly the judge orders it to stop trading and suddenly there is zero value in any shares.

If you want to be a conspiracy theorist, the smart thing for the insiders (those who control the board) to do would be to sell all their shares at this price, then declare bankruptcy. This would be illegal of courses, but there are lots of variations on this theme that make financial sense if you can get away with it.

[WJW]

There is a more likely alternative than paying "nearly any price", which is that the funds in question go bankrupt and default on any obligations remaining. At that point, anyone who hasn't sold yet will be left holding (call options on) stock worth maybe a tenth of its current price.

[pbronez]

If the structurally possible outcomes are:

1) Shorts all come due and hedge funds pay all the retail investors big gains

2) hedge fund dies and defaults so retail get screwed

I’m pretty sure WSB would collectively declare victory. It’s a suicide mission for them.

[lepton]

140% of stock /issuance/, not outstanding. Shorting stock creates new stock. Once all shorts are closed, the 100% of issuance is still outstanding and someone's holding it. Not everyone can get out!

[bluGill]

That doesn't mean the same people. Gamestop does have a long term plan. If it works out the company can be worth money. Buying Gamestop for $2 at the bottom in a few months might be a reasonable risk for the final person holding the bag.