Originally Posted by Idigmygirls

As the stock price goes up, the hedge funds are required to do one of two things: either 1) they must buy the stock at the current price to close out their "short"; or 2) they must put up cash (margin call) that will cover the paper losses and then pray that the stock goes down.

As hedge funds buy back their stock to close out short positions, it further increases demand for the stock, raising the price.

Because the raiders do not sell the stock they purchased, the available pool of shares that could be purchased by hedge funds to close their positions gets smaller and smaller, and the price increases become exponential.