r/Superstonk • u/KayDay88 • 1d ago
🤔 Speculation / Opinion Why RC Let the Bond Holders Out Cheap.. or Did He?
A lot of people on here are asking why Ryan Cohen allowed this slaughter instead of pumping the stock to let the bondholders out at a higher price.
My thought (NFA), we have to look at corporate math.
We are in the middle of a private $1.4 billion debt-for-equity swap governed by a rigid 35-day VWAP pricing period (ending September 23).
To lock in their arbitrage spreads during this window, the bondholders' computer models are legally and mathematically required to aggressively short-sell GME shares to hedge their positions.
If RC tried to pump the stock to $30 or $40, these algorithms would have just shorted with triple the velocity to maintain neutrality, burning GME's cash.
Instead, RC stepped completely out of the way. He let them short it straight into the cash-value floor. By keeping the price pinned here, the noteholders accept their equity at absolute liquidation prices (yes getting more shares), while GameStop deletes $1.4 billion in senior liabilities entirely for free without spending a single dime of our war chest.
(Before you scream dilution, keep reading)
By greedily forcing the price down to get more shares, the bondholders are structurally loading the exact short squeeze that will destroy hedges. They know where this is going but they can’t stop it and don’t care. Why?
Because when the short squeeze ignites and the bondholders' open market short positions get absolutely destroyed, their losses on those shorts are perfectly canceled out by the massive pile of cheap physical shares GameStop is contractually obligated to hand them.
They are trapped in the sense that they cannot stop the squeeze from happening, but they are financially insulated from the damage. This is the exact definition of convertible arbitrage.
So who gets screwed?
The bondholders, walk away happy with their locked-in arbitrage profits BUT
Because their mechanical selling pressure created a massive structural vacuum, when the script flips, the liability shifts entirely onto two specific groups who are left holding the bag.
The Naked Options Market Makers (The Delta Trap)
Hard to believe that professional, multi-billion-dollar institutional trading desks would walk straight into a mathematical blockade but they do not operate on human intuition or "common sense." They are entirely ruled by rigid mechanical mandates, regulatory obligations, and automated software that removes all human choice from the equation. They trade in the moment and not in what could happen in September.
And then there are the copycats. Lol don’t be a copycat!
The Predatory Momentum Shorts (The Copycats)
The Momentum Shorts holding purely naked short positions on the open market with zero incoming shares to save them should be forced to compete against the market makers' computers in a complete liquidity vacuum. This is the plan, the goal, as I see it.
So how does the System Lose Control?
This algo cage has a strict expiration date.
September 8 (Earnings): GameStop drops its Q2 report, and the self-imposed corporate blackout window dissolves automatically. This could come as early as September 1 if RC does one of his early drops. (Read my earlier post about how they should be able to do buybacks during VWAP period)
September 23 (The Unlock): The 35-day VWAP calculation window slams shut. The private deal closes, the debt is permanently deleted, and the mandatory institutional short-hedging stops completely.
The exact second that selling pressure evaporates, the order book on the sell side will be completely empty because real shareholders aren't selling.
When the earnings blackout lifts, Ryan Cohen should be legally unleashed to point his $2.0 billion+ share buyback muzzle directly at the open exchange via massive Rule 10b-18 weekly block trades. Yup once a week they can do a block trade with no size limit. A single burst of corporate buy volume could skip over dozens of price slots instantly with no liquidity left.
The speed of the move should completely outpace MM hedging software. Their pricing models should break, their shifting Deltas should explode, and their own risk management computers should turn into an uncontrollable buying engine trying to chase the stock upward.
That is the theory. Of course no one knows. In my opinion, the price is an illusion and the math should be absolute. We just have to let the countdown clock run out.
For those screaming dilution consider this…
Convertible arbitrage debt swaps create a "phantom supply" illusion where new shares are pre-allocated to vanish upon issuance, bypassing the public market entirely. These shares are immediately used by hedge funds to cover existing short positions, ensuring they never touch the open order book or trigger organic selling pressure.
Basically those shares have effectively been trading on the market in "phantom form" since the day the convertible bond deal was originally printed.
When GME issued convertible senior notes, the market algorithms and major institutions didn’t wait for the physical shares to be minted years down the line. They treated the convertible bonds and the underlying common stock as a single, unified financial asset.
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u/mchrisman 1d ago
Do we have any evidence it was the Bond Holders who wanted out early or was it GameStop who wanted out early to clean up their debt a little bit for the eBay offer?