I find
@arebelspy 's argument (short interest is very high and unreported) to be very convincing.
Here's why:
Secrecy is the nature of a winning short position. If word gets out that you're short, you'll be crushed. It's not my opinion, it's just how the market works.
After GME soared in Jan/Feb. 2021, Melvin Capital and others very loudly announced the closing of their short positions. They had no choice--they had to broadcast that they were out of GME in order to stop people from buying. Did they really close their short? Well, judging by the 1Q losses they announced it makes sense. But did they really close out 100%? Only their trading desk knows.
Once I learned about how a synthetic short works; Buying DITM Calls allows you to avoid a Failure to Deliver notice while also allowing you to not have to report a short position, I knew that the public short information on GME would be suspect until the stock became re-aligned with the company fundamentals. I even recall when Melvin Capital was publicly defending their short position (remember the video conference they'd announced?) they said 'We know more about shorting stocks than you do. Synthetic shorts.' I had no idea what they meant. Now I do and, I think:
1) The stock is (still) way overvalued compared to the value of the underlying company, even after six months. (How the hell does GME go from $145 to $250 in less than a week? with no news???) . I think we can all agree on this point. Therefore:
2) What is preventing the stock from dropping? What set of facts have to be true in order for the stock to stay (rise) at these levels?
A) No net sellers. Everyone who wanted to cash out/sell already has.
B) No short sellers. No one would risk a naked short on this stock, reporting their short interest and bringing attention back to GME.
C) Anytime the stock drops, buyers come in and drive the price back up. Who are these buyers? The WSB/YOLO trade is already over. They spent all their GME money already, very early on. It's not index funds and it's not value investors or even long term buy and hold. So who is the marginal buyer?
D) Is the marginal buyer a i) institutional long? ii) Hedge fund (long) iii) Hedge fund short covering? iv) Someone else?
For me b/c I can't think of who'd be in the 'someone else' category, I'm forced to go with: Hedge fund short covering.
Now if my premise is correct so far (and it might not be); why wouldn't the hedge fund short covers wait and cover at, say $100, instead of $140? Answer:
There are so many that need to cover that the weakest hands have to cover at their first opportunity. If this is true (and it might not be), it would dovetail best with arebelspy's theory over the competing theories.
Final thoughts: I think that $1000 for GME is a bold call and one I wouldn't have made. But, GME has humbled so many stock forecasters and it's re-writing what I consider possible. I'd place a friendly wager (a beer?) that GME will see $500 before it sees $100.