An insight about the warrants
An insight about the warrants - ani.social
I see a lot of talk about the warrants on superstonk and while I can’t post there, I did want to post my insights about it someplace where someone might see it. Sadly no one is visiting this lemmy besides me, but I still want to comment about it. Everyone is comparing the warrants to an option, that it’s the right to purchase a share directly from the company for $32. Which is true, but don’t forget these warrants are being issued as a dividend. This is an important distinction. Keep in mind however, “directly from the company” is just how all dividends work. But things get muddled if the company is short sold. Short sellers exist as middlemen between the shareholder and the company. When a dividend is issued, the short sellers become involved and have to pay the dividend to the shareholder. There has been a lot of DD about GME, and if the float is shorted multiple times over like a lot of the DD suspects, then this has the potential to go nuclear for the short sellers. If the short sellers shorted the stock legally, meaning they located a share when they sold short, then the dividend should flow through that locate to the person holding the share. GME will issue the exact number of warrants for their float, and the warrant will be issued to the shareholder through that locate, and the short seller has nothing to worry about. If, however the short seller DID NOT locate a share, which is what would need to happen for the float to be more than 100% sold short, then there will not be enough warrants if all apes exercise their warrants. The short sellers would have to go to the market, buy a share at any price, and then deliver it to the shareholder in exchange for the $32. If enough apes were to exercise all at once, at a time when the price is above the $32 price point, then this has the potential of creating a short squeeze the likes of which the gods have never seen. Forget Volkswagon. This will be a green bar of God, which will fly past the Moon and exit into interstellar space. It will be far worse than if they had just let it squeeze in 2021. The warrants are going to amplify the short squeeze and turn it into something far worse than anything the market has ever seen before. The question is, are apes smart enough to wait for just the right moment to exercise their warrants? Some are even talking about selling their warrants. No, ape no! When the time comes, it would actually be better to sell a few shares to get the cash to exercise your warrants. Exercising the warrants will squeeze the short sellers even harder than just buying shares. At least - assuming those short sellers didn’t properly locate when they short sold. Many of the DD authors are pretty sure they didn’t. Worse case? You sell a few shares to exercise your warrants and you end up with even more shares, and a slight profit on those shares. If we all exercise when the price is above $32 that is instant profit. This strategy can only end well for us, and has the potential for total annihilation of the short sellers.