Yes. Short selling has the potential for INFINITE losses. Throw in the fact that a Market Maker (Citadel) abused their special "providing liquidity" abilities to create 100s of millions of fake GME shares out of thin air... we are now talking about the potential for infinite losses to be extremely high, especially if there are plenty of "apes" that refuse to sell all of their shares when the price runs up. The only thing I see stopping this big mess when it takes off is if the government steps in and shuts it down for the "safety of the economy".
Although I have bought a handful of shares, I am not totally optimistic that it will work out as some are saying. The powers that be can totally halt trading on a stock or the entire market. The other thing that nobody has been able to explain to me is why the hedge funds don't just sell their holdings to a separate corporation and just let that corporation go bankrupt? That's the whole reason limited liability corporations exist, --right? -- to limit losses. Not an expert in this area, so people in the know can educate me.
The other thing that nobody has been able to explain to me is why the hedge funds don't just sell their holdings to a separate corporation and just let that corporation go bankrupt? That's the whole reason limited liability corporations exist, --right? -- to limit losses.
No, that would not work.
You don't get physical shares when you short. It's just an accounting entry at a brokerage firm.
You owe the shares. Borrow 100 shares and you have to pay back with 100 shares.
You can't just "move" the account to a corporation. The broker would still hold you responsible if there is a margin call that exceeds the value of the account.
If your idea would work, just buy a house, get a mortage, "move" the mortgage to a corporation, bankrupt the corporation, and ... abracadabra!
I do believe that the Reddit promoters are frauds.
However, let's say they are right. I will tell you what will happen (or may have already happened) ...
Goldman Sachs, or some other big player, will have a meeting with the big shorts.
They will offer to buy back all their shares, in exchange for a handsome fee.
GS will then buy and sell in the market to exit their position, over time. They will create money out of thin air, just like the Federal Reserve does, and they will call on the Fed to "borrow money" from, if necessary.
The entire position will be unwound, and that will be that.
GME will go to bankruptcy court, most likely. Or maybe the company will survive, but there will be no killing, other than by GS.
I suspect that was already done long ago, but will be interesting to see if there any fireworks (doubt it, but let's see).
Than short it. So let me ask why all of the talent they have hired over the last two years are all taking stock incentives instead of fat salaries? If this thing is dead on arrival, why hasn’t any of the executives cashed in while the price is still 10x higher than it was pre-January 2021?
Yes. Short selling has the potential for INFINITE losses. Throw in the fact that a Market Maker (Citadel) abused their special "providing liquidity" abilities to create 100s of millions of fake GME shares out of thin air... we are now talking about the potential for infinite losses to be extremely high, especially if there are plenty of "apes" that refuse to sell all of their shares when the price runs up. The only thing I see stopping this big mess when it takes off is if the government steps in and shuts it down for the "safety of the economy".
Although I have bought a handful of shares, I am not totally optimistic that it will work out as some are saying. The powers that be can totally halt trading on a stock or the entire market. The other thing that nobody has been able to explain to me is why the hedge funds don't just sell their holdings to a separate corporation and just let that corporation go bankrupt? That's the whole reason limited liability corporations exist, --right? -- to limit losses. Not an expert in this area, so people in the know can educate me.
No, that would not work.
You don't get physical shares when you short. It's just an accounting entry at a brokerage firm.
You owe the shares. Borrow 100 shares and you have to pay back with 100 shares.
You can't just "move" the account to a corporation. The broker would still hold you responsible if there is a margin call that exceeds the value of the account.
If your idea would work, just buy a house, get a mortage, "move" the mortgage to a corporation, bankrupt the corporation, and ... abracadabra!
But it won't work. :-(
I do not believe that the shorts have a problem.
I do believe that the Reddit promoters are frauds.
However, let's say they are right. I will tell you what will happen (or may have already happened) ...
Goldman Sachs, or some other big player, will have a meeting with the big shorts.
They will offer to buy back all their shares, in exchange for a handsome fee.
GS will then buy and sell in the market to exit their position, over time. They will create money out of thin air, just like the Federal Reserve does, and they will call on the Fed to "borrow money" from, if necessary.
The entire position will be unwound, and that will be that.
GME will go to bankruptcy court, most likely. Or maybe the company will survive, but there will be no killing, other than by GS.
I suspect that was already done long ago, but will be interesting to see if there any fireworks (doubt it, but let's see).
This makes zero sense. GameStop is sitting on like a billion of unused capital. How the hell are they going bankrupt here?
Unused? Do you know what Working Capital is?
They have $1.2 billion cash.
They have $1.3 billion in current liabilities.
They lose money at $365 million per quarter, or $1.5 billion per year (and Cash Flow Negative of almost $1.6 billion per year).
All that cash is spoken for, and they will need ... MOAR ... assuming they wanna stay in business.
Plus ... a business model that ... SUCKS. That's why they are "playing games" with the business model now.
I wrote about this almost 2 years ago when the story was hot. Today, it's the same fucking story.
Nothing has changed, except the shorts are no longer in trouble -- especially now that we are in a bear market.
Why do you think the shorts shorted this thing in the first place? Just for kicks?
Than short it. So let me ask why all of the talent they have hired over the last two years are all taking stock incentives instead of fat salaries? If this thing is dead on arrival, why hasn’t any of the executives cashed in while the price is still 10x higher than it was pre-January 2021?
How can a company with no debt and 1 billion in liquid cash go bankrupt?