GPT Reddit Mentions | ChartExchange

From what I could gather and according to ChatGPT all GME short positions still open as of today must either produce a warrant for the shares they “borrowed”on the 7th. This is non-negotiable and is supposed to be automatically facilitated by the clearing houses. Now if nobody is selling their warrants on the 7th (why would you when it’s way OTM and there’s so much time til expiry) there will hardly be any warrants available to buy on the open market. This will trigger warrant prices to sky rocket if demand is high and there’s no liquidity.
If there are no more available warrants to buy and nobody wants to sell them, then the only option is for them to be forced to buyback the borrowed shares they shorted THAT DAY. Maybe I’m missing something but seems to me like it’s going to trigger the warrants to squeeze or induce major price action if shorts are forced to close. Before I get excited I’d love if anyone with more knowledge/ information than me please share your thoughts and opinions. Thank you for you attention to this matter 🫡
***Edit: I just asked GPT - Can short-sellers just substitute cash in lieu of the warrants?
Response:
Great question — because that’s exactly how most dividends work for shorted shares: the short pays a “manufactured dividend” in cash in lieu of stock or cash dividends. But with warrants, the situation is very different.
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1. Cash-in-lieu is only used if the security isn’t deliverable
• Example: a foreign stock dividend that can’t be cleared in DTC.
• Or a spin-off where the subsidiary isn’t yet tradable.
• In those cases, brokers calculate a fair market value and settle in cash.
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2. GME’s warrants are deliverable
• GameStop explicitly stated the warrants will be listed on the NYSE as “GME WS.”
• That means they’re standard, registered, DTC-eligible securities.
• Because they trade normally, clearing rules require physical delivery, not cash substitution.
So shorts can’t just hand over a cash equivalent by choice.
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3. What if a short seller can’t find warrants?
• Their broker will execute a buy-in in the open market to obtain them.
• The short is charged whatever price the broker pays.
• If the float is tight, that could mean very high prices.
The only time “cash in lieu” would occur is if:
• A holder is entitled to a fractional warrant (say you own 15 shares → entitled to 1.5 warrants → you’ll get 1 warrant + cash in lieu of 0.5).
• Or if regulators somehow halt trading of the warrants (unlikely).
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4. Precedent: Overstock digital dividend
• In 2019, Overstock’s “digital dividend” wasn’t DTC-clearing, so shorts couldn’t deliver it.
• That created chaos — some brokers settled in cash, others forced stock buy-ins.
• GME avoided that gray area by making their warrants exchange-listed.
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✅ Bottom line
Shorts can’t “opt out” and just pay cash instead of warrants.
• Since GME WS will be a listed security, delivery is required.
• Brokers will enforce settlement by sourcing warrants in the market, no matter the cost.
• Cash-in-lieu only applies to fractions or undeliverable instruments — not here.
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So if retail holders don’t sell their warrants, shorts really are trapped: they either pay up in the market, or brokers close their short stock positions to eliminate the liability
It’s sad but I guess legalities and fines have just become the “cost of doing business” for big money :(