GameStop's Ownership Summary
With a short squeeze a possibility, I decided to look into the ownership of the company and see how hard it would be for shorts to cover. How many shares do you think are available?
I recently read about the experience major value investors had when shorting the stock of VW during the financial crisis. This experience (I highly encourage you to read about it here if you haven’t already) made me think of what would happen if Cohen released a new 13D filing this weekend. But absent Cohen picking up more shares, what does the current estimated ownership summary of GameStop look like? How might this ownership summary affect a short squeeze?
Ownership Summary:
I’ve been following GameStop for quite a while. After my initial article describing how I believe a short squeeze is a likely occurrence, I decided to get a feel for the market. After reading hundreds of tweets on StockTwits, along with many articles on Seeking Alpha and other sites, I’ve come to the conclusion that the short sellers absolutely hate the stock, while the long investors are banking on a short squeeze.
Now looking at the long-term feasibility of the company, if everything were to stay the same, I think short sellers are correct. This company may only have one more puff left in it, and that could be what the longs are currently riding right now. The real question is, will a squeeze make these short sellers feel the pain? Or will it likely not happen, and GameStop will just fall like it has time and time again? As the market can stay irrelevant longer than you can solvent, even the possibility of a squeeze can bankrupt shorts. For this reason, I decided to do a deeper dive into the current ownership summary at GameStop, to see if a short squeeze were actually a feasible reality.
I’ve included the ownership tables below. I’ve included only the largest shareholders in each of these brackets, as there were far too many for me to include. Most of this information comes from the June 30th filings, with some of the insider information coming from their most recent filings available:
After looking at this information for a few minutes, I’ve found something quite interesting that I think most shorts are missing. The only reason a squeeze has yet to occur is because there are people shorting the stock. I know this sounds weird, but the only reason there are shares to trade are because shorts are borrowing from major holders to sell on the market. The instant this stops, there won’t be any shares available to buy, causing the biggest short squeeze of all time.
Taking out any shares that would not require a filing with the SEC (so somewhat sure that these investors are still holding the stock), there are 15m shares available for shorts to purchase to cover.
With the short interest still at 57m (as of end of August), this would take a little over 4 days to cover, and that is assuming Ryan Cohen doesn’t file another 13D/A with the SEC this weekend (he may be taking a line from the Porsche playbook and will file the document this weekend as they did with VW in 2008, causing the shares to skyrocket on Monday). Even taking 4 days to cover their entire short position, this stock could skyrocket absent a filing from Cohen.
I’m expecting that Cohen will file his latest 13D if not today, then sometime this weekend if he is making a play to pick up the most shares possible in the shortest amount of time (which I’m also assuming that the 4.572m shares purchased right after close today was either him buying shares, exercising ITM Call options or a mixture of both), as he may have likely been picking up shares during the past two weeks. If he doesn’t file a new 13D, then the release of the Xbox preorder news on the 22nd of this month can also be a massive catalyst for this stock, perhaps culminating in a squeeze in and of itself.
Whatever happens, this amount of short interest will not end well. Even massive, well established short sellers are saying this is one of the stupidest short investments to make (See Thomas Barton’s Comments here). Any short seller at these levels is not taking adequate precautions. Emotion can overcome our logic both on the long and short side. The only problem with losing your logical frame of reference on the short side is that there is infinite loss. I’m hoping that shorts do have some hedges in place, as a run to the triple digits, although highly unlikely but not outside of the realm of possibilities, can bankrupt firms with even a 3% allocation.
As for how I am currently positioned in this stock, both my investing partner and I have allocated 100% of our portfolio to GME Call options dated for October 16th through January 2021. We’ve also allocated a major share of our partnership to GME options as well as another major piece to GME shares. If this investment plays out, it could be a once in a lifetime opportunity, and if no catalysts materialize, we will still have some gains from the volatility spike that has been seen in recent days. I wish good luck to all others holding the stock, and hope that if a squeeze does occur, short sellers can be well hedged. As it currently stands, a short squeeze in this stock at this time will be one for the history books.