Will we ever see "moon"? Na. Well not like it has been hyped up to be.
Keep in mind in order for "moon" to happen the shorts would have to cover. To cover a short one would have to purchase a share. The purchase signals to the market an upward or positive trend. A positive trend further signals the market creating more interest in the stock that in theory will create more interest therefore more purchase. Etc etc.
More shorts having to cover means more purchases.
If the price remains elevated, the shorts will have to eventually cover or drown in margin interest.
Ok. Ok. All that is common knowledge. So I'm not telling you anything you don't already know.
But let's logically think through this experiment.
GME is being naked shorted and massively at that.
So hedge funds have been paying margin interest for the past three years at the least to keep the short positions open. Obviously longer than anyone of them ever expected. And all margin interest at a loss so far.
Now let's focus on Game Stop as a company and it's viability to give us some possible insight into a hedge funds strategy.
As we have seen from it's financials, leadership, profitability and cost saving measures it has proven to be a solid business that is projected to be profitable for the foreseeable future. So any illusions, at this point, of bankruptcy has to be out of the question for any hedge funds that shorted to zero or near zero.
Anyone, IMO, shorting below $7.50 knows their day is coming and are simply buying time via margin interest. Game Stop is valued no less than that amount simply as a result of the cash reserves on hand.
(Just over) $2B/280M shares = an estimated $7.5.
Ok so knowing this we now focus on hedge funds.
Are we to assume that hedge funds are oblivious to these company stats? That somehow they are not privy to publicly available data?
Of course they see this data.
So what options do they have?
Continue to short the stock and lose margin interest despite knowing they will never meet their short therefore their bet will never pay out.
Realize their folly. Cover their short positions. Stop the bleeding of margin interest and lose on having to cover the short at an ever increasing price since the purchase to cover drives the price higher. Therefore having pay more and more for every short position they cover.
Option #2 is "moon" for you and I.
So if option #2 is sure hedge fund demise why would they ever choose that option even if they could. Which they can't since they simply can't cover that many naked shorts. But put that aside. Why would they?
Again. If option #2 is bankruptcy for the hedge fund why on earth would they choose that option? Especially if it would make "non-sophistocated" retail traders like you and I rich?
They have no out. And in the face of that they will choose margin interest bankruptcy. They will choose option #1 with a twist.
With a twist? Yup.
They may be buying time via margin interest. They also see a market implosion in the future. They are likely going to hide their folly in the chaos. Amongst a market implosion they will scurry away and avoid prosecution. Or at least hope to avoid prosecution.
Think about it?!
Admitting defeat (covering shorts) now will implode their hedge fund which will lead to investigations into their fiduciary responsibilities to their investors since their mega millionaire investors will demand it. When hedge funds lose, their investors lose.
So why not just let a black swan event implode the economy let it be used for cover. Heck maybe even some padding since no doubt the fed will swoop in to pad their investors since they would be "too big to fail". Sure their investors will lose but they'll be given the ol' "well. At least you didn't lose everything" as they look over a wasteland of retail investors.
And that's how they'll, yet again, avoid investigation and prosecution.
So the million dollar question, when will it moon and stay mooning?
(Just my opinion)
Depends on your definition of "moon".
Will some make money? Yes.
Will some make lots of money? Yes.
Will we ever see "moon"? Na. Well not like it has been hyped up to be.
Keep in mind in order for "moon" to happen the shorts would have to cover. To cover a short one would have to purchase a share. The purchase signals to the market an upward or positive trend. A positive trend further signals the market creating more interest in the stock that in theory will create more interest therefore more purchase. Etc etc.
More shorts having to cover means more purchases.
If the price remains elevated, the shorts will have to eventually cover or drown in margin interest.
Ok. Ok. All that is common knowledge. So I'm not telling you anything you don't already know.
But let's logically think through this experiment.
GME is being naked shorted and massively at that.
So hedge funds have been paying margin interest for the past three years at the least to keep the short positions open. Obviously longer than anyone of them ever expected. And all margin interest at a loss so far.
Now let's focus on Game Stop as a company and it's viability to give us some possible insight into a hedge funds strategy.
As we have seen from it's financials, leadership, profitability and cost saving measures it has proven to be a solid business that is projected to be profitable for the foreseeable future. So any illusions, at this point, of bankruptcy has to be out of the question for any hedge funds that shorted to zero or near zero.
Anyone, IMO, shorting below $7.50 knows their day is coming and are simply buying time via margin interest. Game Stop is valued no less than that amount simply as a result of the cash reserves on hand.
(Just over) $2B/280M shares = an estimated $7.5.
Ok so knowing this we now focus on hedge funds.
Are we to assume that hedge funds are oblivious to these company stats? That somehow they are not privy to publicly available data?
Of course they see this data.
So what options do they have?
Continue to short the stock and lose margin interest despite knowing they will never meet their short therefore their bet will never pay out.
Realize their folly. Cover their short positions. Stop the bleeding of margin interest and lose on having to cover the short at an ever increasing price since the purchase to cover drives the price higher. Therefore having pay more and more for every short position they cover.
Option #2 is "moon" for you and I.
So if option #2 is sure hedge fund demise why would they ever choose that option even if they could. Which they can't since they simply can't cover that many naked shorts. But put that aside. Why would they?
Again. If option #2 is bankruptcy for the hedge fund why on earth would they choose that option? Especially if it would make "non-sophistocated" retail traders like you and I rich?
They have no out. And in the face of that they will choose margin interest bankruptcy. They will choose option #1 with a twist.
With a twist? Yup.
They may be buying time via margin interest. They also see a market implosion in the future. They are likely going to hide their folly in the chaos. Amongst a market implosion they will scurry away and avoid prosecution. Or at least hope to avoid prosecution.
Think about it?!
Admitting defeat (covering shorts) now will implode their hedge fund which will lead to investigations into their fiduciary responsibilities to their investors since their mega millionaire investors will demand it. When hedge funds lose, their investors lose.
So why not just let a black swan event implode the economy let it be used for cover. Heck maybe even some padding since no doubt the fed will swoop in to pad their investors since they would be "too big to fail". Sure their investors will lose but they'll be given the ol' "well. At least you didn't lose everything" as they look over a wasteland of retail investors.
And that's how they'll, yet again, avoid investigation and prosecution.
So when will GME "moon"?
Near market implosion we may see a mini "moon".
Not financial advice
That makes a lot of sense. Thank you for your time.
👍