Akamatsu then referenced MicroStrategy’s 2021 issuance: "In 2021, MSTR issued $1.05B of 0% convertible notes, the stock dipped after the announcement due to hedging shorts, but later exploded when Bitcoin ripped and the arbitrage unspooled.” Akamatsu went on to connect these dots to GameStop’s current situation: "GME is following the same blueprint now:Issue $1.3B in 0% convertibles, likely going to buy Bitcoin [and] institutions are now shorting GME to hedge.” He pointed out that if GME or Bitcoin rises substantially, the short positions set up to hedge the convertibles could be unwound en masse: "If GME or BTC goes up a lot, the trade gets very interesting as we have a squeeze opportunity here.” He further explained the typical ratio of shorts involved: "A common practice is to short 50–70% of the bond’s notional value in stock.
They make money on the arbitrage between the bond conversion price and the stock price, even if the stock stays flat or drops.” Finally, Akamatsu noted that the volume-weighted average price (VWAP) would influence the conversion price: "VWAP pricing window behavior, they’ll want the stock low to get favorable conversion.
Conversion price will be based on GME’s VWAP […] from 1:00 PM to 4:00 PM EDT on the pricing day.” Criticism Over the Risk Some market watchers have criticized GameStop’s board for incurring what appears to be self-inflicted selling pressure.
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