Gamestop

[james.hendrickson]

So....are you guys tracking whats going on with Gamestop? I got hip to this last night - and so far its been pretty incredible. Evidently small traders, using internet forums like Reddit and 4chan have coordinated to drive up the price of GameStop.

Here is the three month chart of GameStop. The company was in the red until the last few days,

Market manipulation is nothing new, but I believe this is the first time we've seen the kind of coordinated crowd action at this scale. For example, on r/wallstreetbets subreddit there are 300,000 people viewing the subreddit, many of whom are following the CME related threads there.

Axios.com has a great summary of whats happening. I've reproduced it here.

A popular rebellion, organized by the powerless against the powerful. It might have failed in Washington, but it certainly seems to be working on Wall Street.

Driving the news: The market value of GameStop closed at more than $10 billion on Tuesday, on record volume of more than $26 billion.

• The winners: A ragtag group of traders from Reddit and TikTok, led by a man calling himself “Roaring Kitty.”
• The losers: Hedge-fund short-sellers wh0 are learning John Maynard Keynes's lesson the hard way — "The market can remain irrational longer than you can remain solvent."

How it works: Thanks to Robinhood and other stock-trading apps, trading options in GameStop (or BlackBerry, Bed Bath & Beyond or any other smallish company Wall Street traders have bet against) is easy, fun, and carries an irresistible commission of exactly $0.

• Giant hedge funds like Melvin Capital now find themselves at the mercy of thousands of small investors using the internet to coordinate their buying attacks.

The bottom line: Short-selling — betting that a company's stock is going to fall — is a crucial element of efficient markets. But, thanks to Reddit, it has also never been more dangerous.

• Wall Street veterans say the newbies' lack of experience and diversification mean they’ll eventually get crushed by their trades.
• So far, however, the small guys are laughing all the way to the bank.

The Axios story is here.

[amarowsky]

My gang has been talking about this on our "investing Signal Thread".

If I hear correct.... the manager "Melvin" received a bunch of the "Corporate Shareholder SUpport package" to a tune that is north of $2 Billion? (or something about a loan they were approved for to cover all of their losses ?) Sounded like a pretty blatant case of Gov't Corruption if true.... (lobbyists ensuring that these Non-Essential companies stay profitable due to greased palms...) <---- I'm taking a lot of liberties here.... which is bad. But it sucks that is does not seem surprising to me at all IF true.... (I want to be less cynical.... but it's really hard when there is little to any substantial benefits from any congressional actions these days. - of course I'm speaking out of compassion for those who aren't able to own equity shares)

[parafly]

It's a classic short squeeze that is being coordinated online by retail investors. It's pretty fascinating, but like most short squeezes, I would expect it to drop like a rock at some point. The fundamentals for this company simply aren't great.

[Singuy]

This is one of the greatest wealth transfer I have ever seen.

The crazy thing is that I believe the og squeeze came from Tslas massive run. Wsb thinks Elon as their god and support Tesla no matter what, which had a good deal with the run up last year. Now they took their gains and attacking other massively shorted companies. This only snow ball as these retail investors become more and more wealthy, therefore can move larger cap stocks more and more. Knowing them, they are not profit takers but are in a special realm of crusader to cause chaos just to generate meme.
I think what they are doing will make short sellers really think twice raiding a company and distorting for their gains on the back of fear. I hate short sellers and totally support their crusade.

[corn18]

In the midst of a short squeeze on GME, GME short positions are going through the roof. The stupid shall be punished.

[AJSimon]

Next up, AMC. After that, Blackberry. Then, Confederated Slave Holdings, Congreaves & Flammable Powders, and US Hay.

[kork13]

Keep in mind that only some of this is do you directly to the actions of retail investors. The other side of this is the robo investors that make purchases based on technical algorithms analyzing market movements. The funny part about this is that the SEC likely has little capability to take actions against this market manipulation.

[bjl584]

I've been watching this, and it is fascinating.
I'd imagine that these investor groups will just move from company to company, making fortunes along the way.
Kind of makes me want to jump in on the action.
But, if it seems too good to be true, then it probably is.
i'm sure that someone will figure out how to shut this down before too long

[disneysteve]

I haven't read about this in any detail so I don't really understand exactly what happened. In simple terms, how did whoever was behind this get enough people to buy the stock to drive the price up so high?

[corn18]

3 million people in a Reddit subgroup called wallstreetbets. They decided to drive GME (Gamestop) stock price up because all of the institutional hedge fund managers were shorting the crap out of it. Reddit folks started buying it, driving the price up 100%. This caused the short positions to get called which drove the price up. More buying from Reddit folks, more margin calls on the shorts, more buying. Price went from $20 to $380 in a week. If you were short 1M shares (as some hedge funds were), you lost hundreds of millions of dollars. So far, $30B has moved around, mostly from hedge funds to individual investors.

Now the Reddit gang is targeting other stocks that are heavily shorted. It works as long as the position is heavily shorted and you don't mind screwing the short interests. Same thing happened with TSLA but it wasn't coordinated like it is now. Lots of crying on the institutional side.

[disneysteve]

3 million people in a Reddit subgroup called wallstreetbets. They decided to drive GME (Gamestop) stock price up because all of the institutional hedge fund managers were shorting the crap out of it. Reddit folks started buying it, driving the price up 100%. This caused the short positions to get called which drove the price up. More buying from Reddit folks, more margin calls on the shorts, more buying. Price went from $20 to $380 in a week.

So what happens next? All of those people who bought the stock to help drive up the price are now going to start selling their shares and taking that profit. Will that cause the price to drop back to where it was? How many of those people are going to get screwed because they don't get out fast enough?

[corn18]

So what happens next? All of those people who bought the stock to help drive up the price are now going to start selling their shares and taking that profit. Will that cause the price to drop back to where it was? How many of those people are going to get screwed because they don't get out fast enough?

The ones that get greedy will get screwed. They think they can drive it to $2,000 a share. Maybe, but if you buy in now and it drops back to $20 (where it should be), then you lose your arse. The FOMO crowd is probably fully engaged and buying in without understanding the risk. You would think that no one would be shorting GME right now, but they are. The stupid shall be punished.

[AJSimon]

So what happens next? All of those people who bought the stock to help drive up the price are now going to start selling their shares and taking that profit. Will that cause the price to drop back to where it was? How many of those people are going to get screwed because they don't get out fast enough?

The more immediate goal I believe is to try and force hedge funds out of business. They seem to believe EOB Friday is the deadline for short sellers to pay back what they borrowed in their attempts to short the stock in the first place.

But yeah, some folks on the retail side are going to lose their butts over this when GME comes back to earth.

[Leo]

This is fascinating indeed, and fun. Gotta admit, I joined the party last night for only $1,000. Robinhood only allows $1,000 instant deposit per account (other deposit takes 3-4 days).

The way I see it is if I lose my 1k, then all good. I didn't go to Las Vegas last year after all and we got this stimulus money so no harm no foul. If I turn my 1k to 5k, then great, I can buy a new laptop lol.

My wife sees it as gambling, sure. I'm not a reddit member or wallstreetbets subreddit member but I read several posts and looks like these people are holding and in a really good position vs the shorters. Maybe same VW situation back in 2008?

Maybe I am a little late, but hey, gaining 40% today is not bad.

[AJSimon]

This is fascinating indeed, and fun. Gotta admit, I joined the party last night for only $1,000. Robinhood only allows $1,000 instant deposit per account (other deposit takes 3-4 days).

The way I see it is if I lose my 1k, then all good. I didn't go to Las Vegas last year after all and we got this stimulus money so no harm no foul. If I turn my 1k to 5k, then great, I can buy a new laptop lol.

My wife sees it as gambling, sure. I'm not a reddit member or wallstreetbets subreddit member but I read several posts and looks like these people are holding and in a really good position vs the shorters. Maybe same VW situation back in 2008?

Maybe I am a little late, but hey, gaining 40% today is not bad.

The thing that concerns me (or would, if I was more than a spectator) is the server capacity for Robinhood and similar trading apps. Folks are already reporting issues getting on the app. I'm thinking that the selloff happens, folks won't be able to get on the app and sell their shares.