shamelesscloner Posted January 31, 2021 Share Posted January 31, 2021 IMO, the question will boil down to incentives. In its annual report, GME shows 3 million options outstanding under its share-based compensation programme. The strike prices for those options are trivial, implying that the aggregate intrinsic value of those options would be about $1 billion, and most of that will be attributable to the C-suite. But, not all of those options are vested! If I am the CEO or CFO, there's not a chance in hell that I issue new GME shares until MY options have vested and I've liquidated them. I sure as hell wouldn't flush $100m of value from my own unvested options by issuing new shares unless I had no other choice. And with a handful of activists already on the board of directors, you can be sure that the C-suite will have a certain degree of cover if they remain in a holding pattern until they themselves have become independently wealthy. Once my own shares have been liquidated and the vast majority of my options are vested and out the door, then sure, I'd consider a share issuance. Or maybe I would just take my $250m and ride off into the sunset and let the next guy worry about whether to issue shares. At this point, if I were part of the C-suite, I'd be building a shrine to WSB in my living room and fapping every night to photos of DeepFuckingValue. SJ Nice detective work SJ! “Show me the incentive and I will show you the outcome.” -Charlie Munger Link to comment Share on other sites More sharing options...
Aurel Posted January 31, 2021 Share Posted January 31, 2021 Learned recently that Martin Shkreli was early member and moderator of Wallstreetbets subreddit. He has been commenting on the GME situation on reddit over the past few weeks: https://www.reddit.com/user/MartinShkreli You can do that from prison these days?? :-\ There is a note in his account, that says: "Account currently run by Mo & Reida, both of whom have access to ya boi. Posts do not represent views of the account owner unless specified. Not medical or investment advice." Link to comment Share on other sites More sharing options...
aws Posted January 31, 2021 Share Posted January 31, 2021 Reports today say Melvin Capital lost 53%, or about $6.6 billion in January. Just how big was their short? The reporting was that they had closed entirely on Tuesday, which had a close around $150. Unless that was a lie, then they avoided at least the worst of the squeeze on Wednesday, but still had this massive loss? I saw a headline that short sellers lost a combined $70 billion in January, so if they lost almost 10% of it and that was after avoiding a big part of the squeeze, their position must have been enourmous. What, did they short thousands of $115 calls on Monday hoping to make back the losses from the previous week? Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted January 31, 2021 Share Posted January 31, 2021 Reports today say Melvin Capital lost 53%, or about $6.6 billion in January. Just how big was their short? The reporting was that they had closed entirely on Tuesday, which had a close around $150. Unless that was a lie, then they avoided at least the worst of the squeeze on Wednesday, but still had this massive loss? I saw a headline that short sellers lost a combined $70 billion in January, so if they lost almost 10% of it and that was after avoiding a big part of the squeeze, their position must have been enourmous. What, did they short thousands of $115 calls on Monday hoping to make back the losses from the previous week? Yea - there has to be something else going on here. Even if they had shorted it way back at something like $10/share, this would still imply they were short more than 40 million shares just by themselves which I'm not sure I'm willing to believe. I'm going to guess there was a double or triple down somewhere along the way and maybe the use of options that went poorly. Link to comment Share on other sites More sharing options...
Xerxes Posted January 31, 2021 Share Posted January 31, 2021 The DFV dude looks like a gentleman. I half-listened to one his YouTube. Interestingly i saw RFP on one of his spreadsheet on his video. So is that (i.e. GME) what a deep value investment gone right looks like. If so, it looks like one in a ten years anomaly. I recall i listened to at least to two podcasts in late 2020 and early 2021 (i think) and both made very compelling cases on GME, but i just didn't do anything about it, as i was stung mentally by deep-value sucks mentality. Admittingly, had Prem Watsa been invested in GME on a long position last year, i would have complained about it endlessly: "why he cannot just go with something normal like everybody else". That said, it is my hope that he is not getting on the short side of GME either. We don't need mini-nukes on FFH balance sheet gyrating up and down senselessly. On Melvin, i would sleep just fine, if they were to blow up tomorrow. Let this be a 'black swan' of hedge funds, sucking them in (those involved anyways). Link to comment Share on other sites More sharing options...
rb Posted January 31, 2021 Share Posted January 31, 2021 Wouldn't GME issuing shares to the shorts, or even to the open market, just fuel the narrative the deck is stacked against the little guy? It doesn't matter that the shorts have lost billions because the share offering would prevent them from losing more billions while tanking the share price for the retail traders who were long the stock. Not sure GME wants it's legacy to end that way I don't think it's GME management's job to look after the little guy when it could take advantage of a market inefficiency to the tune of billions of dollars. Not even sure what GME's legacy has to do with stock market trades at all. Btw, I have no clue what any of this has to do with the "little guy" of who he is here. IMO, the question will boil down to incentives. In its annual report, GME shows 3 million options outstanding under its share-based compensation programme. The strike prices for those options are trivial, implying that the aggregate intrinsic value of those options would be about $1 billion, and most of that will be attributable to the C-suite. But, not all of those options are vested! If I am the CEO or CFO, there's not a chance in hell that I issue new GME shares until MY options have vested and I've liquidated them. I sure as hell wouldn't flush $100m of value from my own unvested options by issuing new shares unless I had no other choice. And with a handful of activists already on the board of directors, you can be sure that the C-suite will have a certain degree of cover if they remain in a holding pattern until they themselves have become independently wealthy. Once my own shares have been liquidated and the vast majority of my options are vested and out the door, then sure, I'd consider a share issuance. Or maybe I would just take my $250m and ride off into the sunset and let the next guy worry about whether to issue shares. At this point, if I were part of the C-suite, I'd be building a shrine to WSB in my living room and fapping every night to photos of DeepFuckingValue. SJ What SJ says makes some sense. The management could take a wait-to-vest approach. However I think that has approach has some serious risks. The main one is that the current craziness on GME doesn't last until their options vest. Then their options go back to being worth peanuts. I think that this is a very real risk and will very much come to pass. So isn't it better for management to issue stock now? They don't even have to do anything with the proceeds. They can just hold the cash. In this way they bumped up the market value of the company. So if before this the shares were worth 2 or 5 or whatever, if they were to issue say 70 million shares at this point the cash alone will be worth some 71 dollars a share. And that's guaranteed. Sure they're not billionaires anymore, but they can still ride into the sunset. By the way, if anyone else mentions efficient markets to me after this I'm gonna punch him in the face. Link to comment Share on other sites More sharing options...
shamelesscloner Posted February 1, 2021 Share Posted February 1, 2021 Wouldn't GME issuing shares to the shorts, or even to the open market, just fuel the narrative the deck is stacked against the little guy? It doesn't matter that the shorts have lost billions because the share offering would prevent them from losing more billions while tanking the share price for the retail traders who were long the stock. Not sure GME wants it's legacy to end that way I don't think it's GME management's job to look after the little guy when it could take advantage of a market inefficiency to the tune of billions of dollars. Not even sure what GME's legacy has to do with stock market trades at all. Btw, I have no clue what any of this has to do with the "little guy" of who he is here. IMO, the question will boil down to incentives. In its annual report, GME shows 3 million options outstanding under its share-based compensation programme. The strike prices for those options are trivial, implying that the aggregate intrinsic value of those options would be about $1 billion, and most of that will be attributable to the C-suite. But, not all of those options are vested! If I am the CEO or CFO, there's not a chance in hell that I issue new GME shares until MY options have vested and I've liquidated them. I sure as hell wouldn't flush $100m of value from my own unvested options by issuing new shares unless I had no other choice. And with a handful of activists already on the board of directors, you can be sure that the C-suite will have a certain degree of cover if they remain in a holding pattern until they themselves have become independently wealthy. Once my own shares have been liquidated and the vast majority of my options are vested and out the door, then sure, I'd consider a share issuance. Or maybe I would just take my $250m and ride off into the sunset and let the next guy worry about whether to issue shares. At this point, if I were part of the C-suite, I'd be building a shrine to WSB in my living room and fapping every night to photos of DeepFuckingValue. SJ What SJ says makes some sense. The management could take a wait-to-vest approach. However I think that has approach has some serious risks. The main one is that the current craziness on GME doesn't last until their options vest. Then their options go back to being worth peanuts. I think that this is a very real risk and will very much come to pass. So isn't it better for management to issue stock now? They don't even have to do anything with the proceeds. They can just hold the cash. In this way they bumped up the market value of the company. So if before this the shares were worth 2 or 5 or whatever, if they were to issue say 70 million shares at this point the cash alone will be worth some 71 dollars a share. And that's guaranteed. Sure they're not billionaires anymore, but they can still ride into the sunset. By the way, if anyone else mentions efficient markets to me after this I'm gonna punch him in the face. It's just a six sigma event rb ;) Link to comment Share on other sites More sharing options...
StubbleJumper Posted February 1, 2021 Share Posted February 1, 2021 Wouldn't GME issuing shares to the shorts, or even to the open market, just fuel the narrative the deck is stacked against the little guy? It doesn't matter that the shorts have lost billions because the share offering would prevent them from losing more billions while tanking the share price for the retail traders who were long the stock. Not sure GME wants it's legacy to end that way I don't think it's GME management's job to look after the little guy when it could take advantage of a market inefficiency to the tune of billions of dollars. Not even sure what GME's legacy has to do with stock market trades at all. Btw, I have no clue what any of this has to do with the "little guy" of who he is here. IMO, the question will boil down to incentives. In its annual report, GME shows 3 million options outstanding under its share-based compensation programme. The strike prices for those options are trivial, implying that the aggregate intrinsic value of those options would be about $1 billion, and most of that will be attributable to the C-suite. But, not all of those options are vested! If I am the CEO or CFO, there's not a chance in hell that I issue new GME shares until MY options have vested and I've liquidated them. I sure as hell wouldn't flush $100m of value from my own unvested options by issuing new shares unless I had no other choice. And with a handful of activists already on the board of directors, you can be sure that the C-suite will have a certain degree of cover if they remain in a holding pattern until they themselves have become independently wealthy. Once my own shares have been liquidated and the vast majority of my options are vested and out the door, then sure, I'd consider a share issuance. Or maybe I would just take my $250m and ride off into the sunset and let the next guy worry about whether to issue shares. At this point, if I were part of the C-suite, I'd be building a shrine to WSB in my living room and fapping every night to photos of DeepFuckingValue. SJ What SJ says makes some sense. The management could take a wait-to-vest approach. However I think that has approach has some serious risks. The main one is that the current craziness on GME doesn't last until their options vest. Then their options go back to being worth peanuts. I think that this is a very real risk and will very much come to pass. So isn't it better for management to issue stock now? They don't even have to do anything with the proceeds. They can just hold the cash. In this way they bumped up the market value of the company. So if before this the shares were worth 2 or 5 or whatever, if they were to issue say 70 million shares at this point the cash alone will be worth some 71 dollars a share. And that's guaranteed. Sure they're not billionaires anymore, but they can still ride into the sunset. By the way, if anyone else mentions efficient markets to me after this I'm gonna punch him in the face. Without having done a deep-dive into the share-based compensation programme, the immediate incentives remain unclear. Without a doubt, during the share price run-up, the C-suite would have had some vested options and those options would have moved deeply into the money. I have not checked to see what management has done with those vested options (if they were at all risk-averse, they would have sold at least a portion a couple of weeks ago). Usually with share-based compensation programs, the options are vested over a period of time, sometimes 3 years, sometimes 4 or more. What is the annual vesting date? Is it March 12th or is it August 3rd or something else? This I do not know. The proximity of the nearest vesting date will be a major input on the decision about whether to initiate a secondary offering or simply wait. If it's sometime in March, they won't be in any hurry at all to issue shares.... As you noted, if they could actually float a large enough secondary offering, they could push up the liquidation value per share to a high enough level that the C-suite could be guaranteed to happily ride into the sunset. The question is, how high can the issue price be and what volume would the market accept? I am guessing that 70m shares wouldn't be able to attract $325/sh, but then again, in this market that kind of guess is the sort of thing that might not age well ;) . SJ Link to comment Share on other sites More sharing options...
bobp Posted February 1, 2021 Share Posted February 1, 2021 I think gme is now to some extent owned by it's own customers. Do a secondary to hedge funds and they will piss off an awful lot of customers. They'll have protestors outside their stores. A rights offering though, they might be able to sell as a reward to their shareholders. Transferable rights to say thank you for the support. I think the last thing they want is to be seen as siding with wall street. Link to comment Share on other sites More sharing options...
CorpRaider Posted February 1, 2021 Share Posted February 1, 2021 They could do an acquisition of something that fits with Cohen's plan/narrative (and thus wouldn't be likely to crater the EV), with their stonk. Like Pelaton did with buying that real fitness equipment manufacturer. Link to comment Share on other sites More sharing options...
stahleyp Posted February 1, 2021 Share Posted February 1, 2021 It is really, really crazy to think that a $13 billion fund has lost over $6 billion (or whatever) on a company that had a market cap of like $200 million (I think) a few months ago. Absolutely wild. Link to comment Share on other sites More sharing options...
benhacker Posted February 1, 2021 Share Posted February 1, 2021 The losses were definitely not solely because of GME. Heavily shorted shares are up around 50% in January so plenty of pain to go around beyond just GME. Link to comment Share on other sites More sharing options...
shamelesscloner Posted February 1, 2021 Share Posted February 1, 2021 The losses were definitely not solely because of GME. Heavily shorted shares are up around 50% in January so plenty of pain to go around beyond just GME. Yeah but GME losses must be an order of magnitude larger than anything else, don't you think? Link to comment Share on other sites More sharing options...
Jurgis Posted February 1, 2021 Share Posted February 1, 2021 By the way, if anyone else mentions efficient markets to me after this I'm gonna punch him in the face. Efficient markets is God and WSB is his prophit! Link to comment Share on other sites More sharing options...
benhacker Posted February 1, 2021 Share Posted February 1, 2021 I have no basis to say (Melvin comment specifically) but based on position sizing limits I’m familiar with in these kinds of strategies and funds, I would doubt very highly that their loss is more than 20-25% related to GME by itself on the high end. I’d guess guess general correlation, bad bets, and leverage explain it. I’m actually quite curious to see short interest reported on GME in 10 days (reported for end of month) because I’m expecting with options expiry it will be nearly gone. I simply can’t see anyone staying in a short like this after this move. Anyone shorting here is a new short or has risk rules I’ve never heard of... Link to comment Share on other sites More sharing options...
shamelesscloner Posted February 1, 2021 Share Posted February 1, 2021 I have no basis to say (Melvin comment specifically) but based on position sizing limits I’m familiar with in these kinds of strategies and funds, I would doubt very highly that their loss is more than 20-25% related to GME by itself on the high end. I’d guess guess general correlation, bad bets, and leverage explain it. I’m actually quite curious to see short interest reported on GME in 10 days (reported for end of month) because I’m expecting with options expiry it will be nearly gone. I simply can’t see anyone staying in a short like this after this move. Anyone shorting here is a new short or has risk rules I’ve never heard of... Am I understanding correctly that short interest is only reported every two weeks? Where can the most accurate short information be found online? Link to comment Share on other sites More sharing options...
invest0r Posted February 1, 2021 Share Posted February 1, 2021 I have no basis to say (Melvin comment specifically) but based on position sizing limits I’m familiar with in these kinds of strategies and funds, I would doubt very highly that their loss is more than 20-25% related to GME by itself on the high end. I’d guess guess general correlation, bad bets, and leverage explain it. I’m actually quite curious to see short interest reported on GME in 10 days (reported for end of month) because I’m expecting with options expiry it will be nearly gone. I simply can’t see anyone staying in a short like this after this move. Anyone shorting here is a new short or has risk rules I’ve never heard of... The options expiry from 1/29 might account for 5-6mn short shares closed. On Friday, with GME at $312, there were 8.47mn shares ITM, with 7.39mn shares ITM for Calls above $60. These contracts were established this week, since contracts above $60 weren't available until Monday. Looking forward until Jan 2023, 99.9k contracts are ITM as of now with GME at $312. That's 10 million shares. There aren't many large OTM call positions from here— premiums are ridiculous, you're better to sell. The conclusion is that a large portion of the outstanding shorts are still unhedged... Link to comment Share on other sites More sharing options...
compoundinglife Posted February 1, 2021 Share Posted February 1, 2021 I have no basis to say (Melvin comment specifically) but based on position sizing limits I’m familiar with in these kinds of strategies and funds, I would doubt very highly that their loss is more than 20-25% related to GME by itself on the high end. I’d guess guess general correlation, bad bets, and leverage explain it. I’m actually quite curious to see short interest reported on GME in 10 days (reported for end of month) because I’m expecting with options expiry it will be nearly gone. I simply can’t see anyone staying in a short like this after this move. Anyone shorting here is a new short or has risk rules I’ve never heard of... Am I understanding correctly that short interest is only reported every two weeks? Where can the most accurate short information be found online? S3 partners does market analysis to estimate daily short interest. They are posting updates on Twitter. They posted 7 hours ago that their current estimate is 30m shares. I think total outstanding is ~69m. Can’t speak for the accuracy of their estimates. Link to comment Share on other sites More sharing options...
ratiman Posted February 1, 2021 Share Posted February 1, 2021 I realize I'm late to this, but here are Melvin's top put positions from 9/30. Some of these might be hedging long positions, but probably not. Melvin had a 7% portfolio position in GME puts alone on 9/30, when GME was below $12.50, which was up 2 mm puts from 6/30, so a double down from when GME was below $5. https://finviz.com/screener.ashx?v=211&t=GME,LGND,BBBY,IRBT,FIZZ,MNKKQ,TRN,SKT,DDS,GSX,OLLI,HASI,&ta=0&p=w Link to comment Share on other sites More sharing options...
benhacker Posted February 1, 2021 Share Posted February 1, 2021 I have no basis to say (Melvin comment specifically) but based on position sizing limits I’m familiar with in these kinds of strategies and funds, I would doubt very highly that their loss is more than 20-25% related to GME by itself on the high end. I’d guess guess general correlation, bad bets, and leverage explain it. I’m actually quite curious to see short interest reported on GME in 10 days (reported for end of month) because I’m expecting with options expiry it will be nearly gone. I simply can’t see anyone staying in a short like this after this move. Anyone shorting here is a new short or has risk rules I’ve never heard of... The options expiry from 1/29 might account for 5-6mn short shares closed. On Friday, with GME at $312, there were 8.47mn shares ITM, with 7.39mn shares ITM for Calls above $60. These contracts were established this week, since contracts above $60 weren't available until Monday. Looking forward until Jan 2023, 99.9k contracts are ITM as of now with GME at $312. That's 10 million shares. There aren't many large OTM call positions from here— premiums are ridiculous, you're better to sell. The conclusion is that a large portion of the outstanding shorts are still unhedged... Yeah, sorry, I wasn't saying options expiration took down the entire short position, there is also the last week of massively liquid trading that I would assume most short sellers existed reduced meaningfully during (and took their losses) - in addition to options expiration. Link to comment Share on other sites More sharing options...
alpha Posted February 1, 2021 Share Posted February 1, 2021 with options expensive, has anyone risked just straight shorting this at this point of 300+ price? I saw a Bloomberg headline this AM suggesting Citron and Melvin had both covered. So at this point, what is supporting it at $380 instead of the $17 it traded at just 3-weeks ago before this orchestrated manipulation occurred? I would expect now that the thesis has played out - and now the short squeeze forced - people would dump the shares to collect the "tendies"? Why is this still going higher? It looks like the wallstreetbets subreddit has gained over 1.2 million subscribers in the last 48 hours (1.9m to 3.1m). It's just a mob mentality throwing money at the wall because they see their friends making money. At some point the trend will reverse when players start realizing their gains and price will drop as fast as it went up... your guess is as good as mine when that happens but I think it's obvious it will be sooner rather than later, especially if government checks are delayed... Up to 6.2m subscribers now :o Almost 8 million subscribers now Link to comment Share on other sites More sharing options...
Junto Posted February 1, 2021 Share Posted February 1, 2021 It looks like my puts might actually print by Friday. Momentum is failing and stock is falling hard. Link to comment Share on other sites More sharing options...
aws Posted February 1, 2021 Share Posted February 1, 2021 If it ends like this then it will be a pretty boring movie. Link to comment Share on other sites More sharing options...
shamelesscloner Posted February 2, 2021 Share Posted February 2, 2021 Vlad made an appearance for the last 16 minutes of this Clubhouse hangout with a16z to share details of why Robinhood halted GME: https://a16z-live.simplecast.com/episodes/elon-musk-vlad-tenev-good-time-clubhouse Link to comment Share on other sites More sharing options...
Castanza Posted February 2, 2021 Share Posted February 2, 2021 If it ends like this then it will be a pretty boring movie. Like a flash in a pan ;D Shits starting to get annoying tbh. Ready to get back to that value rotation :o Link to comment Share on other sites More sharing options...
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