Or you just borrow shares from Blackrock to sell to everyone else who wants shares.
Aka: short selling. Yes, short-selling creates "virtual new shares". Its only an issue if the company gets acquired. The name of the game is to buy low sell high. Short selling inverts it by selling high and then buying low at a later date.
That's almost 23 billion dollars. With this much short interest the borrow fee must be close to 100% APY [edit: 35% APY]. There's really no good way to wait it out for the shorties. They're getting squeezed by the borrow rates, margin, and WSB.
My overall point is that looking at the float is almost meaningless.
Days to cover is arguably a more important figure (how easy is it to buy / sell GME? Since GME has such high volume in the past few days, its not really hard at all to find shares right now).
You're right that the borrow-rate is also important to look at, but the short-float doesn't necessarily correlate with the borrow rate. You absolutely can't state facts like:
> With this much short interest the borrow fee must be close to 100% APY.
Seems to be 35%/year right now for GME shorts. If a GME short borrowed at $300, the stock price needs to fall to $200 by 2022 before they lose money. Do you really think GME can be propped up above $200 for a whole year?
If they short sold months ago at lower borrow costs, they've basically would be in the position to wait it out longer than most bulls who are just messing with 3-month call options.
> There's really no good way to wait it out for the shorties.
Selling ITM calls (and maybe hedging slightly by buying an OTM call) seems to be the obvious bear trade that would be doing well under these circumstances. The theta on these call options are ridiculous. That brings theta over to your side.
35% year doesn't sound so bad until you realize that a lot of shorts are heavily leveraged--they borrowed money to have the "capital" to make a bigger trade than they could really afford. This would multiply their earnings if it works out, but it also multiplies their losses and the interest they pay. I assure you if a hedge fund could just wait out the crowd they would do that rather than take a billion dollar loss, but if they are leveraged it requires their lender's cooperation.
Ameritrade wouldn't let me write covered calls (for calls expiring today) unless I called up their trading desk. Which had a 700 person line in front of me.
> Seems to be 35%/year right now for GME shorts. If a GME short borrowed at $300, the stock price needs to fall to $200 by 2022 before they lose money. Do you really think GME can be propped up above $200 for a whole year?
Are you factoring in the cost of the call option that prevents their entire portfolio from getting nuked if GME keeps going up for some reason?
Not all short sellers entered their position at $5. Many have come in at $100 and $200, etc. They will not necessarily not face the same short squeeze, but you're right they will probably still face the same borrow rates.
> why would blackrock lend you their shares so that you could tank their value?
Because Blackrock commonly does whole-market index funds. They have to hold onto those shares as long as people are buying their mutual funds.
Might as well collect some interest while waiting. They wouldn't lend all their shares away: they just lend away all the shares that they expect that their mutual fund won't sell this year.
Aka: short selling. Yes, short-selling creates "virtual new shares". Its only an issue if the company gets acquired. The name of the game is to buy low sell high. Short selling inverts it by selling high and then buying low at a later date.