>By the end of January 2021, some funds had closed out their short positions in meme stocks, realizing significant losses. 62 In contrast, some funds that were long GME saw significant gains.63 Some investors that had been invested in the target stocks prior to the market events benefitted unexpectedly from the price rises,64 while others, including quantitative and high-frequency hedge funds, joined the market rally to trade profitably.65 Staff believes that hedge funds broadly were not significantly affected by investments in GME and other meme stocks. Staff did not observe that any advisers to private funds and registered funds experienced liquidity issues or difficulties with counterparties.
Their sources for this are various news articles that were told this by hedge funds or anonymous sources. It is mentioned somewhere in the report that the SEC does not have the data or capability of detecting naked shorting.
All we can know is that the short positions definitely existed at one point, but that's about it.
>GME short interest hit 50% of shares outstanding first in 2012 and then again in 2015, 2016, and 2018, before rising even further in 2019. From then until early 2021, GME short interest hovered around 100%, hitting its high of 109.26% on December 31, 2020.
They were mostly closed prior to the huge price spike, the spike was caused by retail buying, probably thinking they were causing a squeeze. You can read the details in the SEC report on the topic (note the massive drop in short interest in Figure 5).
Doesn’t closing positions cause a price spike in the first place? It seems to me that they kicked the can down the road waiting for a better opportunity to do so.
It did cause some price spiking, but the FOMO caused a much bigger spike and eclipsed the effects of the squeeze. Why do you think they "kicked the can down the road"? Short interest is still around 1%, down from over 100% in January. The hedge funds in question realized huge losses in Q1.
