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Thread 2: As an example, the largest injection that we know of was a $2.5billion cash infusion meant to shore up a large fund that publicly berated the r/wallstreetbets @wallstreetbets crowd about $GME,
and based on the current short interest (still 136%) it seemed as though most were successful in posting margin thus far.
Finally, today... this morning the stock didn't do much, up 10%-15%, then something happened.
Finally, today... this morning the stock didn't do much, up 10%-15%, then something happened.
What it is isn't precisely clear, but it was likely a fund unable to raise more funds being forced to exit their position and covering their short. That trade caused the stock to skyrocket 75%.
This, in turn, triggered many more margin calls, as of today's close, likely requiring a cash infusion of 100% of 75% of the total market cap
(remember 136% of the shares are shorted and the current margin requirements of an account holding these shares short is around 75-100% of the total amount shorted) of $GME required in accounts shorting $GME no later than 9AM EST tomorrow morning.
SHOULD THIS NOT HAPPEN, the broker will start liquidating positions, including the short position in GME, in these accounts until the losses are recovered, or the account is completely liquidated.
Here's the rub about that sale, the fund DOES NOT GET TO CHOOSE THE BUY PRICE, they just HAVE TO BUY to cover their short. This is called a short squeeze, and this was all in the cards before market close today, at an absolutely cataclysmic level.
Now, let's look at the after market activity in GME on 1/26/21, it's up an additional 50%ish after hours. What does this mean?
This means that unless these accounts (again, mainly hedge funds) can come up with, conservatively, 125% of the value of the entire company, they MUST buy back their shares or liquidate to meet the margin call.
Now, recall that 136% of the company is shorted, and you see where the problem is. On the one side we have a bunch of retail investors who own most of the float (shares outstanding) coordinated by a message board not to sell their stock unless they make an exorbitant premium.
On the other hand you have hedge funds who, as of today, are being asked for SERIOUS money to meet their margin requirements or they risk being FORCED to buy those shares further driving up the price as they're buying them back and exponentially increasing their losses.
It is truly the most epic trade I've seen in the 23 years of trading stocks. It WILL kill some funds, it WILL make millionaires out of some janitors, and it HAS established a brand new paradigm on Wall Street for fund management.
Oh and if at this point, you're wondering just how much money these funds were standing to make on their short bets.... probably around 200 million dollars, or the total market cap of $GME at the time when they shorted 136% of the float.
Oh and if at this point, you're wondering just how much money these funds were standing to make on their short bets.... probably around 200 million dollars, or the total market cap of $GME at the time when they shorted 136% of the float.
Hardly something worth risking the fund over.... if they only knew what was about to happen.
So that, my friends, is the modern day Robin Hood story, nothing illegal happened, and no regulation against this should be developed.
So that, my friends, is the modern day Robin Hood story, nothing illegal happened, and no regulation against this should be developed.
This is no different than the corporate raids of the 80s.... except in this story, the little guy won... and they won BIG!
