Hedge funds represent investors that expect to see profits. Let's say you manage a hedge fund worth 500 million and you took a short position of 10 million on amc when it was $5. That doesn't seem like much of a risk, right? You have 500 million and you're only risking 10 million against a stock that is heading toward bankruptcy. Well if you didn't cover that short then as of TODAY you'd be down 450 million on a 10 million dollar investment
$50 stock price minus the $5 stock price when you short leaves $45. 45 x 10 million is 450 million. Your whole fund is only worth 500 million
How long do you think your investors will put up with this? Then when you are forced to cover it causes the stock price to rise and the 600 million hedge fund falls then the 700 million then the 1 billion then the 5 billion 10 billion 50 billion 100 billion and it's
time.