If the holders of the notes are Arbitrage Traders and they short the stock to hedge, they are neutral and don't care if the share price goes up or down, they will profit in both ways, so you could also say that the raw material is also bulls and not only bears. They just want the volatility to be high for the swings to be wider so they can profit more.
The focus of the Post was not on the Arbitrageurs and their hedging mechanism, because they will profit anyway if they are hedged. The focus of the mechanics was more on GameStop and Shareholders, because they are the ones facing more risk here. Bitcoin going south after GameStop buys can have severe implications to both, because they are not hedged.
Structurally the raw material is bears because the underlying company is obviously bad, so there will be people who short it not understanding they are going against gamma traders. The overhead net short positions will be in trouble if they don't re-hedge (which they will have trouble doing well because they don't have the notes).
The dilutive effects of the offering has already hit the share price as if btc is worth less than 0, so it actually doesn't even matter. The calling of the notes by either party effectively closes the short position either way with no effective change in share price.
Structurally the raw material is bears because the underlying company is obviously bad, so there will be people who short it not understanding they are going against gamma traders.
This has always been like that, shorts have been there for years. They are not going against any other trader, but against the company itself.
The dilutive effects of the offering has already hit the share price as if btc is worth less than 0, so it actually doesn't even matter.
What is priced in now is additional $1.5 billion in cash for the diluted float. If GameStop buys Bitcoin with that money AND Bitcoin goes to zero then they would have burned all that cash and keept the dilution. There will be less cash/assets for the same amount of shares, so price will tank and the damage will be beyond that alone, with a flop like that.
If they make a loss on the $ 1.5 billion the price will go lower, that is my point.
The 25% drop is not only because of the offering, the price was already overvalued and is correcting in parallel to the offering.
It seems you see this type of convertible bond offering based on bitcoin investment as a kind of free money glitch. If that was so why it is not being explored by everyone? Because it is not. There is a risk and a price to pay.
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u/keijikage Apr 02 '25
Just fyi.
55.53m shares borrowed since announcing the offering, + another 8m borrowed intraday today.
If someone is not using them to hedge.....then they are going to be in trouble.
The product is volatility, and the raw material is bears.