January 11, Monday.
At 7:04 in the morning, CNBC sent an interview invitation to Era Vanguard's public email address.
Lin Shicheng arrives at the office at 6:30 every day, and has already screened the mailbox before 7:00 -
Spam, daily PR, SEC notice filing.
This email was bumped to the top. The sender is a producer of CNBC's "Squawk Box" program team. The title is only one line:
"Interview Request: GameStop - Investment or Speculation?"
When Lin Shicheng transferred the email to Zhao Chen's personal mailbox, Zhao Chen was preparing breakfast in the apartment.
Su Wantang took out the toast from the toaster, and Shen Zhiyi sat in front of Dining Table to flip through a cross-border compliance memorandum.
Zhao Chen glanced at the email title on the phone screen and put down the tea cup.
"CNBC wants to interview, the topic is GME - investment or speculation."
Shen Zhiyi raised his head. "Andrew Ross Sorkin?"
"It's most likely him."
"I think this person will not ask, 'Will the stock price rise?'. He will ask about structural contradictions."
Shen Zhiyi closed the memo and tapped his fingers lightly on the table.
"First, why did Era Vanguard choose to open a position in GME.
Second, if you believe GME is valuable, why not break through 10%.
Third, are we taking advantage of retail investor sentiment to create Short Squeeze?"
Zhao Chen turned the phone over and put it on the table, picked up the teacup and took a sip.
"The second question is the hardest to answer. You can't say 'we don't want to trigger Section 16', that might attract regulatory attention.
Nor can we say 'we can buy at any time but choose not to buy', that sounds like position manipulation.
Let me put it this way - 9.99% is a compliance red line, not a value red line.
The position limit of Era Vanguard is determined by the system, not by judgment."
Su Wantang put the toast on the plate and pushed it in front of him.
"After Iceberg Short Selling last week, CNBC discussed GME three times on live broadcast.
Sorkin quoted Iceberg's report on the show, but did not take a clear side.
He invited you for an interview because he wanted to hear Era Vanguard's positive response to the accusation of 'speculation'."
"Then give him a positive response."
Zhao Chen picked up the toast and took a bite,
"You can reply to them. The interview will be scheduled for Wednesday via video link.
Thirty minutes, no interview outline, no review in advance.
Does not answer questions about specific transaction prices and position management."
Shen Zhiyi stood up and went to get the laptop.
"I'll draft a memo of interview points.
Sorkin interviewed the founder of Melvin Capital last year and asked all about the liquidity of the Short Selling structure.
He understands the mechanics of trading and doesn't stop at the level of 'what do you think about the stock price?'"
January 13th, Wednesday.
New York It snowed the most since the beginning of winter.
Outside Floor-to-Ceiling Window of Era Vanguard's office, Jersey City on the other side of the Hudson River was shrouded in a gray-white snow curtain. The ferry moved slowly on the river, dragging a dark gray trail.
Zhao Chen is sitting at the conference table, and the camera in front of him has been connected to the CNBC studio signal.
Su Wantang put Zisha Pot on the corner of the table and refilled the tea twice.
Shen Zhiyi and Lin Shicheng are sitting at the workstation next to them, with two monitors in front of them--
One is CNBC's real-time picture, and the other is GME's intraday data.
At 8:40, the connection was connected.
Andrew Ross Sorkin's face appeared on the screen, behind him the dark blue background of the CNBC studio.
His voice was smooth and direct, without any pleasantries.
"Mr. Zhao, thank you for accepting the interview. Go directly to the topic--
Era Vanguard holds a 9.6 percent stake in GameStop.
You initially opened the position at less than ten yuan, and now the stock price is forty-eight yuan.
There is a question in the market - if Era Vanguard really thinks GameStop has value, why doesn't it break through the 10% threshold and continue to buy?
Why not push the position to 15% or 20%?
Is it because you yourselves know that GameStop's stock price has deviated from Fundamentals?"
Zhao Chen picked up the teacup, took a sip, and put it down.
"Mr. Sorkin, Era Vanguard's position limit on GameStop is 9.99%.
This is not a value judgment, but a compliance red line. Holding more than 10% of the shares will trigger Securities Exchange Act Section 16's short-term trading profit return rule.
For any reverse transactions within six months, all profits will belong to the company.
This means that Era Vanguard loses the ability to exit at the right time after its position exceeds 10%.
We chose not to break through 10 percent, not because we think GameStop has no value,
It's because we need to retain the flexibility to walk away unscathed when value materializes."
Sorkin did not relent.
"But critics say this 'flexibility' itself is evidence of speculation.
Real long-term investors won't care about the six-month limit.
Berkshire has held Coca-Cola for decades and has never had to think about when to quit.
If Era Vanguard thinks GameStop is valuable, why can't he hold it for five or ten years like Berkshire did?"
Zhao Chen put down the tea cup and looked directly at the camera.
"Mr. Sorkin, Berkshire will not invest in a company where Short Selling's proportion exceeds 100%.
It's not because Berkshire doesn't like GameStop,
It's because in Berkshire's investment framework, there has never been a variable called 'Short Sellers Stampede'.
Era Vanguard The core logic of investing in GameStop is not how much money this company can make in the next ten years.
It is this company's market price that has been severely distorted by a failed Short Selling structure.
What does it mean when the Short Selling ratio exceeds 100%?
This means that the number of shares loaned out to Short Selling in Circulating Supply exceeds the actual number of shares in circulation.
The same batch of stocks was loaned out Short Selling and sold to the buyer,
The buyer lent the stock to another Short Sellers, and that Short Sellers was sold to the next buyer.
The same batch of chips is used repeatedly in the Short Sellers chain, forming a cycle.
This cycle has a physical limit--
When all the stocks that can be borrowed have been borrowed and there are no new chips in the market that can be borrowed Short Selling,
Any new Buying Pressure will trigger a mutual stampede between Short Sellers.
GameStop's Short Selling ratio was over 105 percent at its highest.
This number itself is a signal that the market structure is failing."
Sorkin leaned forward. "You're implying that Era Vanguard came to GameStop just for Short Squeeze."
"I'm not implying. I'm stating a fact."
The sound of Zhao Chen is smooth and clear,
"When the Short Selling ratio exceeds 100%, the market itself is in an unsustainable state.
This state of affairs will be corrected sooner or later.
The correction method may be Short Sellers closing positions in an orderly manner, or it may be Short Sellers stepping on each other.
What Era Vanguard does is to buy when the market is most panicked and bring the stock price back to a more reasonable range.
As for whether Short Sellers will be trampled to death in this process, that is their own position management problem.
When the Short Selling ratio exceeds 100%, they should know what kind of structure they are in."
Sorkin was silent for two seconds.
"Mr. Zhao, last question. GameStop's stock price is now 48 yuan.
Iceberg said it was worth ten to fifteen yuan. You said it was within a reasonable range.
If the stock price drops back to ten yuan, what will Era Vanguard do?"
Zhao Chen picked up the tea cup. He took a sip and put down the cup.
"Era Vanguard's position logic on GameStop is independently judged based on public data.
The core variables have not changed--
The proportion of Short Selling still exceeds 68% of Circulating Supply.
Short Sellers still needs to buy back 50 million shares to close the position. Ryan Cohen's transformation plan is still advancing.
The DFV position still shows no signs of being sold.
If the stock price drops back to ten yuan, my answer is - Era Vanguard will continue to hold it. I will not sell one share."
The interview ended after eight minutes. Andrew Ross Sorkin said something at the end of the show--
"The logic of Mr. Zhao is very clear. But the market will give its own answer."
Zhao Chen turned off the video connection and leaned back in the chair.
Shen Zhiyi walked over from the work station, holding the newly updated exposure monitoring report in his hand.
"During the interview, GME's pre-market trading jumped from 48 yuan to 52 yuan.
Someone has already posted a screenshot of the interview on WallStreetBets Forum.
The title is 'Era Vanguard: We are here for Short Squeeze'.
The comment section is having a blast."
Zhao Chen took the report and read it over.
"Today, I finished the last 270,000 shares and pushed my position to 9.9.
Then stop. Let the market do the rest."