Exactly this. Many of us have been WSB for a while and it is really hard to know whether all this GME buzz would amount to anything material until it actually happened

A typical lottery in the USA has odds of like 1 in 300 million. The fact alone that more than 100% of float was shorted put the odds of this happening way above any chance you have of winning the lottery. Suggesting that just because there was an aspect of chance involved that it is on par with a lottery is ridiculous.

With 1/300M you're likely thinking of a jackpot. Winning anything is much lower. Powerball is 1/38 for the lowest payout. And in the same way, there will be a lot of people around breakeven point in the GameStop lottery, some small winners and some people who are now set for life.

> Powerball is 1/38 for the lowest payout

I'm not familiar with the Powerball, but I'm guessing that's for a prize of somewhere around $5 for a ticket price of $2. Hardly relevant, is it?

All those small wins fuel buzz / conversation, and likely increase participation.

The problem with the lottery is the odds and the expected value, not the concept of risk and reward, which is present in all manner of investing.

Then you are not paying attention. The floating shares are fewer than the shorted shares. Even if all the floating shares were bought, there are not enough shares to cover the short's position.

So what? The same share can be bought more than once in just the same way it can be sold more than once; in fact, the one necessarily entails the other.

What happens if nobody sells? Say 40% of total shares are floating. You the hedge fund owe 60% of the shares because you shorted them. Even if your position is closed immediately (hint, it won't), you would still need to find the remaining 20% of the shares that you owe. Who will give you that 20%? Well I of course, but the difference is, I get to dictate what the market price is.

We saw this happen in 2008 with Volkswagen. 1% of the total shares were floating because Porché had purchased the remaining, the rest of the shares were owned by institutions and they were not selling them.

> What happens if nobody sells?

This has nothing to do with the ratio of short shares to float. What happens if there are 300 shares floating, 20 short shares, and nobody sells?

They owe more shares than there are available and they pay interest on said shares. Even if nobody sells, the interest gets accumulated and they are bleeding.

And that interest can get very VERY high - the cost to borrow shares when no shares are available can run to $shareprice A DAY (see "hard to borrow").

...yes? That's all shorting. You have to pay the borrow costs as long as you're borrowing the stock.

But how is having short interest of 140% of the float different from having short interest of 80% of the float?

yeah, but how much can they bleed? Can they just give up, default and declare bankruptcy? And then all the people hoping for a short squeeze end up holding stock that is not worth much anymore?

They will get margin called, their assets will be liquidated and the stocks covered.

yeah, but how will the stock be covered, and by whom? If there is no enough stock to buy to cover the outstanding contracts?

GME can always issue more shares and that will give them a sizable injection of cash.

I thought that takes a lot of time though, because of SEC filings, after which the bubble could be over. Or are they allowed to hold on to a bunch of ready-to-go shares?

(Honestly asking and don't know, everyone please only answer if you have knowledge of how these kinds of things work and are able to identify and explain away the relevant confusions.)

What I know is basically just what I read in this article: https://www.bloomberg.com/opinion/articles/2021-01-25/the-ga...

However, it looks very clear that GameStop is allowed to hold on to a bunch of shares it can sell directly in the stock market, since it did exactly that:

> Happily, GameStop does have an ATM offering going. It put it in place on Dec. 8, 2020, when the stock was at about $16.35. The way these things work is that GameStop disclosed that its bank could sell stock—up to $100 million worth—“from time to time” at GameStop’s request “consistent with its normal trading and sales practices”; it did not disclose any particular schedule, and has not yet reported if any shares have been sold, or how many, or when. So I don’t know if GameStop had sold the whole $100 million before Friday’s wild run, or if it had any stock left over to sell; if it had any left over, I don’t know if it sold it all on Friday. I hope it did!

I am not sure either tbh.

> The floating shares are fewer than the shorted shares. Even if all the floating shares were bought, there are not enough shares to cover the short's position.

that's not necessarily true.

Quoting Matt Levine[0]

> There are 100 shares. A owns 90 of them, B owns 10. A lends her 90 shares to C, who shorts them all to D. Now A owns 90 shares, B owns 10 and D owns 90—there are 100 shares outstanding, but 190 shares show up on ownership lists. (The accounts balance because C owes 90 shares to A, giving C, in a sense, negative 90 shares.) Short interest is 90 shares out of 100 outstanding. Now D lends her 90 shares to E, who shorts them all to F. Now A owns 90, B 10, D 90 and F 90, for a total of 280 shares. Short interest is 180 shares out of 100 outstanding. No problem! No big deal! You can just keep re-borrowing the shares. F can lend them to G! It's fine.

[0] https://www.bloomberg.com/opinion/articles/2021-01-25/the-ga...

Sure. What if they can't borrow them though? What if they are owned by retail/institutions/board? Some conservative estimates put WSB holding 7-8% with some people owning .2-0.4% and that is without the lurkers.

Same thing happened to Volkswagen, only 1% of the shares was available for purchase and they had to close their positions.

Do lottery entrants have influence on their probability of winning?

They influence the magnitude of the expected payout, certainly. (In a negative way)