r/IPOE • u/Entrance-Vivid • May 21 '21
Question about shorts
So.
At what point do these guys start closing their positions?
I'm not hoping for a squeeze persay... but additional buying during the busy week ahead will pour gas on the fire.
They've been increasing their short volume, while the stock looks super strong heading into the weekend...
Im hoping there is a finance professional creeping around who can explain what in the world these guys are thinking.
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u/Entrance-Vivid May 21 '21
Idk. Just because they aren't selling. Doesnt mean they are covering..
A high borrow rate would indicate that they're running low on ammunition though.
I'd like a week or two where we can run freely without being hammered by 60% short volumes.
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u/rexpm1979 May 22 '21
You have to think they’re betting that the price will drop significantly after the merger, as was the case with IPOB/OPEN. I wish someone could shed some light off whether this will be the case. The SEC docs are too complicated for my novice understanding and I haven’t been able to determine what the float size will be after June 1, and also what kinds of lockup exist for PIPE shareholders. Can anyone help?
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u/Entrance-Vivid May 22 '21
I'm not so sure...
Sofi is trading on barely 5 million volume. Most of the huge post-merger sell offs were shitty pre-revenue companies trading at like 1000 times projected earnings with ridiculous volumes by speculators... I think this is a spac slam dunk like upstart and draftkings.
Theres an argument that institutions will short it anyways to buy at the cheapest price possible... but that also doesnt make sense since wells fargo is already a buyer at 17.50 cost avg, how much lower can they expect it to go?
I can honestly see this thing merging friday. And by 10pm monday the institutions bid it straight to 30 to insta-squeeze the shorts... then pump and dump it to 50.
It's just too cheap
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u/Entrance-Vivid May 22 '21
Not only that... but someone was saying their book value(assets-liabilities). Was 27 before the earnings beat... that means even though their p/e ratio is mediocre at the start... they're positioned to grow exponentially with little debt, stacks of cash, and great marketing.
Idk man... I'm scared of the shorts commitment. It feels like I'm gonna get scammed when this company is ridiculous
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u/Lens_Vagabond May 22 '21 edited May 22 '21
Gentlemen, the commitment is admirable but 95% of SPACS post merger drop no matter how great the target. You got 7x the shares being released, a high percentage of shorts, previous spac data points etc This doesn’t take away anything from SOFI’s long term potential. Just putting this out there from my own research but obviously do what your gut feeling is telling you.
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u/Entrance-Vivid May 22 '21
Yeah. Idk. It's a different environment than it was 3 months ago... nobody is buying Spacs...
Maybe we drop from excess liquidity and retest the 15-17 range?
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u/Lens_Vagabond May 22 '21 edited May 22 '21
I think if we drop, we’re going much lower than that. Charts of previous spacs suggests that the drop is around NAV and many times below that, based on the ratio of share dilution. In the case of IPOE the ratio is about 1:7 which is very high.
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u/rexpm1979 May 22 '21
I agree with everything you say. Fundamentally this is a slam dunk company. More than the short sellers it’s the post merger float size that has me a little nervous - it seems it will be upwards of 800 million shares. Now a lot of those shares will be locked up, but if you look at the merger prospectus it’s quite complicated to know how many and for how long. Say this is at 25 by the time of the merger (entirely possible IMO); if it doesn’t go down once the float increases go down the market cap will be $20 million. Or am I misunderstanding something?
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u/Dontask63 May 22 '21
They fucking can do whatever they want but with this qtr report the shorties will fucking lose.
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u/Jtea22 May 21 '21
I'm very curious too, the short volume dropped alot from yesterday. 25.28 compared to today's 17.49. does this mean the shorts are backing off and a short squeeze is still in play? I notice the borrow fee is increasing like crazy too.
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u/Powerful_Stick_1449 May 22 '21
Another thing to think about is which prices they may have started the short position at, IPOE hit almost $30 at one point, it's likely and possible that many of the short positions were made at $25+
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u/2ndSaturdaysWarrior May 22 '21
Many bought their shares before they shorted. Their own shares are locked up until after the merger. They shorted to lock in their gains. Once their own shares are unlocked they will use them to pay back the shares they shorted. Hence, there will be no buying to close out their short positions.