None of them have any gains until they press the sell button.
The early buyers will probably sell a little bit to lock in profits. This drives the price down. They’ll then go on to social media and pump GameStop everywhere with memes and stories about taking down Wall Street. This brings in new money to pump the price back up.
This is what they’re already doing: Pumping the stock to bring in new money, which they collect by selling the new entrants some of their shares. The new entrants catch on to the game and start recruiting more people to pump the price further, and so on.
Eventually people realize this can’t go on forever. New entrants might see their value drop 50% as old entrants cash out. They’ll panic and sell everything, which triggers more people to panic and sell, which drives the price down.
Some will try to buy the dip, but eventually the pump will run out of steam and new players will get tired of bleeding money for a mythical “infinity squeeze” that never happens.
> New entrants might see their value drop 50% as old entrants cash out.
New entrants are the bag-holders. The ones left holding the bag after everyone has pulled the money out.
Actually the bag holders are likely anyone foolish enough to try and transfer GME to another brokerage and ends up watching the share price plunge while they wait for them to show up in their new account.
> Humor me for a second - what happens the the (unlikely event) they ALL hold until it hits $10,000, and the "infinity squeeze" really does happen?
At some point, you can't squeeze infinite money out of short sellers. In theory, if they're still short when the price passes a threshold higher than their margin limits, they'll get margin called and forced to sell. If the brokers and clearing houses didn't get the risk math right, they'll have to cover some of the difference. This is part of why RH had to pay (a lot) extra into collateral pools just to trade GME at all today. I don't exactly know which parties bear the risk in extreme scenarios.
Practically speaking, if they suspect a squeeze is happening they'll start competing against each other to get order fills. If they all set sell limits at $10K, they risk losing out to someone who sets their sell at $9999. That person risks losing out to someone who sells at $9800, and so on down the line. Again, there isn't actually infinite money to be extracted from the system, so it becomes a competition to sell before your WSB peers.
Even worse, the subreddit will be full of posts about "buy the dip" and "diamond hands" that encourage the naive players to not exit the trade. This creates more room for savvy players to get their sells in before the situation resolves and the price comes crashing back down. Again, it's a race to the bottom.
Sadly, much of the profit going to WSBers will come not from hedge funds, but from other WSBers who think they're "buying the dip" or front-running a short squeeze when in reality they're just buying shares from other WSBers.
The hedge funds have to pay them, when they go out of business the brokerages are on the hook. Realistically the govt will bail them out or change the rules of the game.
The price is fueled not by holding a stock, the price changes when the stock sells. The current blitz is being fueled by Johnny come lately bag-holders.
At some point the buyers will run out, the price will go down and the only ones left will be the broke bag-holders.
