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$GME For those still wondering:
Where did the dark pool orders come from?
How did they find so many shares to short GameStop?
1. The $1.3B convertible notes offering doesn’t settle until April 1, 2025. That’s when GameStop receives the cash and the buyers receive their bonds.
2. But arbitrage desks don’t wait for settlement. They hedge the moment the deal is priced, by shorting the underlying stock.
Why?
Because the strike price of the convertible is $29.85.
So if they shorted GME at $28, $27, or lower, they lock in profits risk free at conversion.
3. These short trades showed up as massive dark pool volume and shocked people who didn’t realize the mechanics.
But this is textbook convertible arbitrage.
4. So why did the VWAP end up so low?
Because arbitrage desks were shorting aggressively throughout the trading session, and mostly in dark pools. That constant sell pressure dragged down the volume weighted average price (VWAP).
Why does that matter you say?
VWAP was used to calculate the conversion rate. The lower it goes, the more shares they get per $1,000 bond.
So in simple terms:
They front ran the VWAP by shorting GME heavily.
That pushed the average price down, giving them a better conversion ratio. More shares, MORE UPSIDE LATER! ‼️
This wasn’t illegal.
It was smart money engineering the VWAP to hedge and optimize the convertible.
They win on both sides of the trade.
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