I didn't really know what to title this one, and it isn't often that I would do a new thread.
The subject is a hat tip to Anthony Tse in his interview with Ticky Fullerton rather than the sound of a sinking ship.
Ive been reaching out to wiser heads to understand what has been going on, and it goes a little something like this.
Currently Galaxy has approximately 15% of their shares in the market shorted.
At today's close of $2.85 that works out to be approximately $171 million.
It is around 60 million shares that have been shorted and on a daily trade we generally roll over around 2.8 million shares.
The shares traded on borrow have been thrown into the market quite heavily in order to drive down the share price.
The problem is that the number of shares that are being purchaerp beyond these short traded shares is considered quite minimal.
Generally it costs the borrower around 1 to 2% to use the shares, though depending on the arrangement they might be asked to return them at any time.
Think about that.. you have $171 million worth of shares on borrow and the lender says tomorrow..
Give em back!
Of course they have made their 1 to 2% and also the opportunity based on your shorting to be able to purchase more are bargain basement prices, purely on your borrowed efforts.
If they want to drive the share price down further they need to borrow some more.. but at 15% where are you going to get that from?
If they use the shares they have been accumulating to do so it becomes a mess and might not be enough to freak out the investors (generally retail) to press the sell button.
I'm guessing most of us by now are just happy watching and waiting for the news.
Which raises another point..
If there are only around 2.8 million shares traded on a general basis then what happens on a good news announcement?
Will there be enough traded to cover 60 million shares? - I think not.
By the daily average it would take the equivalent of 20 days purchasing every single share traded in order to return those borrowed shares to the rightful owner.
And that's also hoping that the owner doesn't decide to really screw you over and buy themselves.
At $3.50 that 60 million shares becomes a cost of $210 million, but $3.50 is easy... Going beyond that... And you're still trying to return say 1/2 of those shares...
Becomes a bit risky, and either whoever is doing this has incredibly deep pockets and doesn't care what happens, or they are taking an incredibly risky gamble that will ruin them.
Tesla has had some funds try shorting them, and they have had to close up...
You owe $171 million as of today.
I am laughing so hard about how much the borrowers need to return.
As Anthony Tse said..
Good luck!
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