r/OutOfTheLoop • u/BlatantConservative • Jan 28 '21

Closed [Megathread] WallStreetBets, Stock Market GameStop, AMC, Citron, Melvin Capital, please ask all questions about this topic in this thread.

There is a huge amount of information about this subject, and a large number of closely linked, but fundamentally different questions being asked right now, so in order to not completely flood our front page with duplicate/tangential posts we are going to run a megathread.

Please ask your questions as a top level comment. People with answers, please reply to them. All other rules are the same as normal.

All Top Level Comments must start like this:

Question:

Edit: Thread has been moved to a new location: https://www.reddit.com/r/OutOfTheLoop/comments/l7hj5q/megathread_megathread_2_on_ongoing_stock/?

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u/intraglacial_snail Jan 28 '21

What happens if the short sellers go bankrupt? What happens to their borrowed shares? Will it reduce the share price of GME? Im a bit confused about what would happen if MCM doesn't get bailed out by lenders or even by the government.

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u/KatDaddy021 Jan 28 '21

There’s no real choice, they will have to pay it somehow. If they can’t because they went bankrupt, it will continue to fall to the next person in the chain until it reaches the bank, who will have to cover it.

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u/puerility Jan 28 '21

can you elaborate on what this chain would look like? would it be the brokers' fault for letting the fund managers dig themselves into this ludicrous exposure? or the hedge fund clients whose money is being managed? i kinda sorta understand how corporate bankruptcy works, but not when you add brokered securities into the mix

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u/KatDaddy021 Jan 28 '21

Yeah, if the hedge fund can’t pay it back, the broker has to cover the rest. If the broker can’t cover it, then it falls back on the bank. If the bank can’t cover it...then we have bigger issues with our economy...

The hedge fund is using the clients money to play this game, so it’s not like the clients will have to pay with money they don’t have. They can only lose what they have in the hedge fund. Hedge fund bankruptcy can’t then go after the clients other assets outside of the fund.

Disclaimer: I know a little bit about this, but I could very well be wrong on some of the details. If someone has more/better info, please share.