What are the possible outcomes of GME situation assuming that GME investors hold their positions indefinitely?

Question

I am a newbie investor and the GME situation is very interesting for me. I have read many articles about it and could not find an answer to a simple question:
What happens if investors simply hold GME stock for a very long time?
Finviz indicates a Short Float = 121.98% for GME, so the shorting did not reduce significantly over the past days.
I understand that many platforms do not allow buying GME stock (or drastically limit the amount), but this does not prevent the investors to simply hold the stock.
This answer explains the big amounts the shorters must pay in interest if they keep the shorts opened, so I assume that the hedge funds cannot hold forever.
I am puzzled by the fact that no one seems to speak about a possible way of solving this. Is creating stock by the company a solution for this? Or maybe the insiders selling the stocks to either help the company or get rich will reduce the price and allow the hedge funds to reduce the short positions they have?

Bob Baerker · Accepted Answer

At about 40% (per year), GME's borrow rate (it fluctuates daily) is high but not crazy high.  That would not prevent shorters from keeping a position open for awhile.
As explained in my answer in your link, there are two major problems that shorters face:

The stock remaining borrowable so that they can keep their short position open

Being able to maintain and afford the margin.  This is the biggest problem when a short position is moving against you and is the reason for the massive losses incurred by the shorters when GME's price rose.

None of this has any effect on the investor who owns GME shares other than that he made a bundle he can pocket huge gains, if so inclined.  It's likely that at some point, reality is going to set in and when it does, GME's price is going to collapse.
The large number of shares short doesn't help or hurt the company.  Their day to day operation is unaffected by it.  No one makes investment decisions based on wanting to help the the hedge funds to reduce the short positions they have.  If the regulators don't step in, the market will solve the problem, eventually.  Winners win and losers lose and eventually they move on to another game.

What are the possible outcomes of GME situation assuming that GME investors hold their positions indefinitely?

One Answer

Add your own answers!

Ask a Question