u/thetaFAANG

Normally short selling is supposed to be a signal of price efficiency, an expression that the share price should be lower. A market participant to add rationality to bullish views more quickly.

In the SPCE case, debt investors received warrants recently in December 2025 that allow for the option of them giving the company $250m if the share price is above $6.696

more specifically starting on June 18th 2026 and expiring in 2030

https://www.sec.gov/Archives/edgar/data/1706946/000119312525325124/d667551d8k.htm

The share price was around $3 when this was negotiated and nobody expected the share price to be this high by so soon, especially in the face of continual dilution of the stock directly on the secondary market to retail.

The warrant holders suddenly find themselves at a guaranteed profit. They fork over $250m on June 18th for shares at $6.696 and use them to cover shares they shorted at $8.40, resulting in a 25% profit. If they don’t short now, they risk losing this opportunity in favor of being directionally long at high share prices and less liquidity to offload shares or being below the exercise price entirely if momentum doesnt sustain. These are debt traders normally seeking to get 5-6% a year on their positions across their entire portfolio, this shaves a half a decade off of what they normally do.

Additionally, this allows bullish momentum to fully quantify a major market participant’s size. They only need to hedge 31.7 million shares and the biggest bearish moves occurred at that $8.40 price range, but not ALL 31.7 million because the delta isn’t 1 its closer to .5 - .7, so 16-25 million shares need to be hedged at these prices.

So they’re going to be done soon

AND Virgin Galactic gets a windfall when they exercise their warrants. The company transforms from reporting going concerns to capitalized again, actually justifying the share price.

So, BTFD, the shorts aren’t bearish. Just warrant hedging.

not financial advice. I’m long a mixture of calls and shares in a variety of account types.