Correct, they'll make more on a $5 drop then they

Correct, they'll make more on a $5 drop then they will on 40 cents. Unless they have a pool of cash like Andrew Left had (alas no more after GME) it's a very high risk proposition. If the price runs past their margin the brokers will start buying to cover (if the shorts don't beat them to it) to minimize their exposure leaving them with little to nothing or a negative balance.