The float that is available for trading is roughly 30 million shares. This stock has been naked shorted into oblivion, there are more than likely hundreds of millions of naked shorts that need to be covered, almost all of them held by retail.
Now as some wrinkly brained ape recently pointed out, when a naked short is covered, that share is essentially evaporated, it no longer exists, just as it shouldn’t have existed in the first place. It is not added back into the pool of tradeable shares, and cannot be recycled back into the market to cover another short.
There was some FUD a few weeks ago where someone was saying they don’t need to buy every share retail owns, as once a share is bought back it can be recycled. Well that myth is now busted.
Let’s say the float is 30 million, and the naked shorts amount to 300 million (it’s likely alot more). Well that means that for every 10 shares Ken and friends need to buy back, only 1 share gets added back into the pool to be recycled.
It’s also the reason why the price won’t crash down quickly after the peak. The price will stay at the peak or near it for days, as hundreds of millions of phantom shares get evaporated without having any downward pressure on price. The only downward pressure at the peak can come from 1 “real” share being recycled to reshort or sell, for every 10 that are bought to cover. So buy pressure will be at least 10x sell pressure, and thats at or near the peak!
And this, my beautiful apes and apettes, is why retail can hold out for whatever price they want. This is the MOASS, a potential infinity squeeze. It has never happened before, and it will never happen again.
Now let’s see a muthafuckin’ show of hands of who’s holding out until a peak well above $10 million. 🙋 💎🙌🏻🚀🚀🚀🚀🚀🚀🚀
Edit 1: When Margin comes a calling it doesn’t mean that every time Ken buys 10 shares 1 of them gets put back into the pool. I was trying to explain the process in a simplified way.
In reality what will happen is that every single phantom share will have to be evaporated (bought from diamond handed apes) FIRST, until there are only 30 million shares left circulating. When these phantom shares are being sold after the peak (if there is one), they contribute 0% to sell pressure. So the seller gets to dictate the price in this trade. And the price is in the tens of millions.
Short squeezes are a natural feature of the market and in a typical squeeze with no phantom shares, the peak is hit and the crash comes quickly as shares are recycled and sold and reshorted. This is what Warden meant by a “rug pull” before he resigned. He was incorrect though, that shouldn’t happen here.
TLDR: In a normal market where buyers and sellers meet, 1 share sold = 1 share bought that can be sold again or lent out to be shorted. With phantom shares as the tastiest ingredient of the MOASS, 1 share sold = 0. After the peak of the MOASS, when you sell 1 share to Ken, he pays you for it, and essentially gets nothing in return, apart from a share that evaporates as soon as he pays you. You get the tendies, and he gets nothing.The only benefit for him in this part of the deal is that his liability to cover is reduced by 1 share.
Edit 2: Actually he already got something out of the deal. He got $7 (about the price of a jar of mayo) when he created and sold the phantom on the market last year while trying to bankrupt Gamestop.
Edit 3: A wrinkly ape pointed out in the comments… “Also important to recognize because this strongly indicates that a sharp drop-off is only telling you that peak has NOT been achieved yet.”
I’m surprised this needed to be said. If there are more shares in existence than are supposed to be, a short squeeze is the closing of positions already sold, not the actual trading of stocks. They’re buying shares to deliver to transactions already made in the past, not buying then selling. What has to happen is they then have to convince someone who purchased the stock long ago (but they just now delivered on) to then sell back to them, so they can deliver to someone else who purchased the stock also long ago. Then they have to repeat that until only 73M shares exist.
The big and important issue is what happens if you have 74M shares that are locked (either institutions, insiders, or diamond hand retail)? You cannot close out the remaining 1M position ever. Now in that situation, I can imagine them just ignoring the extra 1M FTDs (especially considering they’ve been cruising with potentially 100s of millions of current FTDs). But if you have 150M shares that are locked, because retail owns 100M and 50M are locked by insiders and institutions who won’t sell (or can’t), it gets hard to ignore 77M shares during a margin call/reconciliation. That’s what creates the an infinity squeeze.
And that’s why warden was wrong (whether he knew it or not). A short squeeze with a ratio less than 100% is resolved quickly because shares can be recycled. A short squeeze with a ratio over 100% is about IOUs that potentially can’t be closed ever, and that is what will create the ever escalating demand.