GameStop Corp (GME) is once again in the headlines with reports that investor Carl Icahn continues to hold a large short position he began building when the stock was at its triple digit highs in January 2021. GME’s short interest is $1.33 billion, 52.86 million shares shorted, 20.50% SI % Float, 17.05% S3 SI % Float (which includes synthetic longs created by every short sale in the Float number), and stock borrow fees between 8.00% and 9.30%.

GME shares shorted hit a historical high of 284.78 million shares shorted and 141.86% SI % Float on 12/31/20 while it hit its short interest high of $8.89 billion on 1/27/22 when its stock price hit a split adjusted price of $86.88 with 102.32 million shares shorted.

There has been short covering in GME for the last month to the tune of 1.06 million shares bought to cover, worth $27 million, a 2.0% decrease in total shares shorted even though its stock price fell -37.9%.

But we saw a return of short selling activity over the last week with 738 thousand shares shorted, worth $30 million, a +2.7% increase in total shares shorted as its stock price fell -22.5%.

Shares shorted have been climbing in 2022 but are nowhere near the number of shares shorted we saw in early 2021.

Timing is everything when shorting GME. Shorting GME from 12/31/20 to its stock price high of $86.88 on 1/27/21 was akin to the Boss Battle at the end of most video games, there is a slim chance you get out alive, but if you do survive you will come out bloodied. Shorts were down $10.27 billion in mark-to-market losses in less than a month. But, if shorts had the ability to “respawn,” the rest of 2021 was like driving Mario Kart with the Star of invincibility as they were up $4.22 billion in mark-to-market profits for the rest of the year. GME short performance in 2022 was rather tame, with shorts up $152 million in year-to-date mark-to-market profits, up +9.5% on an average short interest of $1.60 billion.

A short seller who got into their GME position at or near the top on 1/27/21 is sitting on a large mark-to-market profit and will be difficult to squeeze out of their position, especially when doing so would trigger large realized profit tax payments. And in Carl Icahn’s case, his large mark-to-market profits and large capital base which can be used to offset any temporary margin calls or high stock borrow financing costs make it unlikely that he would be forced to exit his position.

While we have almost fifty-three million shares shorted in GME, there will not be a barrage of new GME short selling to drive down its stock price as stock loan supply is severely limited with over 95% of available stock borrows already used to cover short sales. There are three million shares left to borrow on the street and if short selling demand increases, the cost to borrow GME stock will spike. The vast majority of GME short selling has already been done, existing short sellers will be able to add some more exposure to their positions and new short sellers may enter the trade – but there is not enough stock borrow available to execute large short trades in the stock.

Therefore, while new short selling will have some effect on GME’s stock price, it will be long buying and long selling which drive price movement in the near future.