Redditors Drive up Gamestop Stock Prices, causing Hedge Fund Short Sellers Billions in Losses

[Tilted]

I've been following this story and I've been on reddit for the last two days following this, and it very much appears at this point that it's not about money, it's about sending a message, particularly to Melvin Capital, who is currently taking the brunt of the current ass-pounding. And I can't say that I'm sorry for them. It looks like they've destroyed a lot of people, and they've been shielded by corporatist machinations up to this point. Now their losing at their own game. **** 'em.

If I had the first clue about daytrading and how the stock market worked, I'd throw a thousand bucks or so that way. I would never advise anyone to risk more money than they can actually afford to lose. It's all always a gamble. But, I'd love to see the little guy use the free market to butt**** a corporate player who desperately deserves it.



With that said - Who wants to take bets that congress passes some shady-ass legislation to protect their corporate masters.

... BEFORE you get your stimulus checks.




I bet that something gets set in motion today.

I can only hope that if that happens people FINALLY wake up to the reality of where they stand in the eyes of congress. The peasantry does not matter to these ****ing people.

To the extent some short sellers are getting burned, I don't have a lot of sympathy for them. They should know the risks going in. Short selling plays a useful role in equity markets, but it can also be abused and cause - sometimes unjustified - damage to companies.

That said, I'm not sure why GameStop short sellers would be targeted like this. I've never followed GameStop. I looked at it for the first time this morning in response to a query about what's been going on with it. There was good reason why people might have been short selling it. And this wasn't the kind of crush-a-company-short-selling that sometimes happens. If anything, short sellers were probably helping the company itself. It wasn't trying to raise additional capital through public equity offerings. To the contrary, it was repurchasing shares - so it likely was benefitting from short sellers betting against its share price. (To reiterate, I've not been following GameStop for long and wouldn't consider myself particularly well informed on its business operations and situation as I would with some other companies. So maybe there are things I'm not aware of from my initial look at it.)

Maybe GameStop short sellers have been targeted for other short selling they've done, and their GameStop positions were seen as an easier way to do damage to them? I don't know. Also, as I suggested, maybe this started as sincere push back against some things. But at this point it's gone beyond that into precarious territory for many of the very retail investors involved. And I wouldn't rule out that this was contrived from the beginning by some seeing an opportunity to use a populist message to martial help in a modern method pump and dump. The rhetoric would look much the same. The point would be to make it look like this was justified populist push back.

I'd add that, while short sellers may have taken a beaten in this, some hedge funds - which, generally speaking, seem to be at least symbolic targets for this push back - are surely benefitting. Most of GameStop was, of course, institutionally owned. And now hedge funds are almost certainly taking advantage of this opportunity to reduce or close out their positions at valuations which are much higher than they thought they'd be able to exit at. They're going to do very well with this situation. Some retailer investors will (or have) also. But many retail investors are going to have been taken advantage of and will lose a lot of money. It's going to require some luck to get out - or stop the rotation, depending on how some are trading this - at just the right moment.

 

[Tilted]

The media are trying to portray a lot of these reddit people ("reddit bros" ) as alt-right extremists and Trump supporters.

Are you kidding me? Reddit is a festering sewer of Socialists, Commies and authoritarian leftist nut-cases. The kind of people for whom the media normally massages their taints (although, I'm kind of rooting for them in this one). It's hysterical watching the media machinations today.

I hope they're as transparent to everyone else.



My guess there's too many people saying things like "What's a game-stop? The only hedgefund I know of, if is gas money for my clipper!"

Yeah, I don't see this as being driven by supporters of President Trump in particular. Surely some of those involved are, but surely some come from the other side of the spectrum. Who knows what the mix is. This seems more populist than pro-Trump or anti-Trump, and populism is strong on both sides of that divide.

Also, your last sentence points to one of the problems I see in this. I'd bet there are large numbers of people buying shares in GameStop who haven't looked at a single GameStop financial filing. With rare exceptions, no one should ever be choosing individual stocks if they haven't themselves looked at the financial realities of the companies they're investing in such that they can sort out for themselves whether or not it makes sense to invest in them.

 

[UglyBear]

Just watch them break the whole thing trying to save their buddies.
Just seven days in, but oh how I miss Trump...

 

[Toxick]

Yeah, I don't see this as being driven by supporters of President Trump in particular.

It's not. They're using Trump and alt-right as bogeymen to scare off the ignernt.

Since my work day began I haven't been able to follow much, so I don't know if it's working. I'll check at lunch time.

Also, your last sentence points to one of the problems I see in this. I'd bet there are large numbers of people buying shares in GameStop who haven't looked at a single GameStop financial filing. With rare exceptions, no one should ever be choosing individual stocks if they haven't themselves looked at the financial realities of the companies they're investing in such that they can sort out for themselves whether or not it makes sense to invest in them.

I agree - that's why I don't play the game. I don't know enough about it to risk my livelihood, my teeny-tiny little nest-egg, or children's inheritance by rolling those dice. I wish I did. It looks fun - and I've thought it looked fun even before yesterday.

 

[Toxick]

That said, I'm not sure why GameStop short sellers would be targeted like this.

To be honest, I'm not entirely clear on the entirety of the situation, but from what I gather, they were not initially targeted per se. I believe there was a misquote, or a mistake or something completely unintentional by someone - Elon Musk, I wanna say?! - which propelled GameStop - completely unaware and unprepared - into the stratosphere.

Suddenly, short sellers who were counting on GameStop's demise, were sitting there like Wile E. Coyote who just blown up by his own rocket holding up a sign saying "WTF just happened?"


Then these redditors - in particular the subreddit r/WallStreetBets - smelled blood in the water and started salivating and twisting the knife. I saw HUNDREDS of messages, just this morning, saying hold onto your shares, or keep buying. It seemed to be working, last I looked. GameStops shares - 10 bucks a share, like, last week - were over $420 this morning!

 

[RoseRed]

Gamestop down 50% today.

 

[kom526]

Gamestop down 50% today.

That stock ticker is going to look like an ECG from a tweaking meth head today.

 

[Toxick]

Gamestop down 50% today.

Apparently a lot of daytrading apps are blocking the sale of GME


I smell class action.

 

[Tilted]

It's not. They're using Trump and alt-right as bogeymen to scare off the ignernt.

Since my work day began I haven't been able to follow much, so I don't know if it's working. I'll check at lunch time.




I agree - that's why I don't play the game. I don't know enough about it to risk my livelihood, my teeny-tiny little nest-egg, or children's inheritance by rolling those dice. I wish I did. It looks fun - and I've thought it looked fun even before yesterday.

I used to daytrade. I've pretty much stopped that. I still invest in equities, but I don't try to daytrade. I think it used to be possible to make money that way - i.e., consistently or in the long run. But I don't think it really is now. Daytrading is about speed - seeing things the broader market, focused more so on the big picture, doesn't see as fast as you might. The competition for a human daytrader now is computers running algorithms designed to do much what human daytraders might do. And humans just can't consistently beat computers on speed. We can't get the information as quick, we can't assess it as quick, and we can't react to it as quick. You might have some winning daytrades; but in the long run I think daytrading is a losing proposition.

When it comes to investing in equities, I generally think people shouldn't be in individual stocks unless they have the time and inclination to follow those stocks - to stay on top of what is happening and what might be changing with them. I'd advocate what I call the thesis method. An investor should have a thesis for why they think a given stock, at a given price, is a good investment. What is likely to happen with the business? What changes in societal trends might help the business? What aspects of its financial realities are being missed by the market in general? What do they understand about the business that the balance of other market participants don't?

An investor might end up being wrong with their thesis, but they should have one.They should understand the business well enough to be able to explain - for themselves, not just by repeating what others might say - why the business is likely to be worth more in a year or 10 years or whatever. They should have a working thesis. Then, as part of the method, they should stay on top of changes which might affect their theses - which might demonstrate that it's wrong or which might change it from having been right to being wrong.

 

[Tilted]

Gamestop down 50% today.

Yeah, it was down more than 60% at one point, then recovered to something like 20% down. It's now about 30% on the day. The volatility is crazy - and should be worrisome.

 

[Tilted]

That stock ticker is going to look like an ECG from a tweaking meth head today.

Indeed. And with all the automatic trading halts today - to the upside and to the downside - it would look like the patient flatlined a bunch of times before being revived.

 

[Tilted]

Apparently a lot of daytrading apps are blocking the sale of GME


I smell class action.

That was probably a bad move. But it was understandable from the brokers' perspectives. I haven't read their justifications, but I suspect they were actually trying to avoid potential liability. They were probably gonna get sued either way. But if they didn't do anything, victims of all this likely would have sued saying the brokers should have done something to protect them from themselves amid what the brokers surely recognized as market manipulation. I think, if you're inclined to fall prey to what's going on, so be it... that's your issue. But that too often isn't how things work these days; people feel entitled to be protected - by someone else, be it businesses or governments - from the consequences of their own actions.

For, e.g., Robinhood, they might also have been thinking they wanted to limit the number of people who joined in this and ended up losing money. Even aside from the potential for lawsuits, a lot of those people would be irritated at Robinhood and stop using it. As it is, the move probably backfires as they get trashed on social media.

 

[Tilted]

To be honest, I'm not entirely clear on the entirety of the situation, but from what I gather, they were not initially targeted per se. I believe there was a misquote, or a mistake or something completely unintentional by someone - Elon Musk, I wanna say?! - which propelled GameStop - completely unaware and unprepared - into the stratosphere.

Suddenly, short sellers who were counting on GameStop's demise, were sitting there like Wile E. Coyote who just blown up by his own rocket holding up a sign saying "WTF just happened?"


Then these redditors - in particular the subreddit r/WallStreetBets - smelled blood in the water and started salivating and twisting the knife. I saw HUNDREDS of messages, just this morning, saying hold onto your shares, or keep buying. It seemed to be working, last I looked. GameStops shares - 10 bucks a share, like, last week - were over $420 this morning!

That's what a pump and dump looks like. This is just using modern techniques and modern messaging. Instead of phone calls saying... we've got this great stock that you need to get in on... there are social media messages saying... hold... buy... let's do this. The idea is to make people believe this is a good stock to buy for some reason, and hopefully they spread the message to people they know and at some point you're in the position to sell your shares at inflated prices. Also, here, instead of the messaging being... this stock is about to climb, the business is about to take off, they're about to get regulatory approval to go forward, or whatever... the message is... let's stick it to the man, let's punish these bad guys.

The increasing share price reinforces the idea that it makes sense to buy these stocks. Victims don't realize they're being scammed while it's happening or they wouldn't go along. It works - the stock price goes up - until it doesn't. Then some walk away having made a lot of money and some walking away having lost it.

What I don't know is whether this started organically and then turned into, in effect, a pump and dump. Or whether someone planned this from the beginning. I could easily believe either scenario. Regardless, there are going to be a lot of victims here - some short sellers, sure, but also the retail investors who got sucked into this. Some of the people saying buy and saying hold on social media will be among the victims, but some will have said those things knowing what was going to happen and trying to trick other people into continuing to inflate the share price so they could make more money. And the short sellers aside, some of the supposed bad guys - the hedge funds - are going to be among the winners. That's who owned GameStop. They've seen the value of their positions increase a great deal. They'll be, proverbially, laughing all the way to the bank.

What I'd like to know, as I haven't read the stuff being posted on reddit, is whether many are trying to make substantive cases for why GameStop might be worth what they are asking people to pay for it. Are people talking about its business realities? Its financials? Or are they just suggesting people individually take a financial hit so that they can collectively stick it to the man?

 

[GURPS]

Regardless, at this point it is a crowd-sourced pump and dump.

I dunno about the Dump ..... but it being wildly reported outside the main street media as a FU to Wall St Hedge Funds for picking on Game Stop

 

[GURPS]

Are you kidding me? Reddit is a festering sewer of Socialists, Commies and authoritarian leftist nut-cases. The kind of people for whom the media normally massages their taints (although, I'm kind of rooting for them in this one). It's hysterical watching the media machinations today.

Yep

 

[GURPS]

 

[Tilted]

I dunno about the Dump ..... but it being wildly reported outside the main street media as a FU to Wall St Hedge Funds for picking on Game Stop

How were they picking on GameStop? Just by shorting the stock? Have many of the people suggesting that looked at GameStop's financials? It looks to me like there was a good case to be made for shorting the stock. That doesn't mean the company is done for; perhaps it can turn things around. But the business has been struggling and from a cursory look at its situation I see some pretty major headwinds. I wouldn't have shorted its stock but I also wouldn't have invested in the company.

Regardless, the short sellers were probably helping the company more than they were hurting it. The company was buying back shares, it wasn't trying to raise capital through new equity offerings. So it was benefitting from supressed share prices in at least that way. GameSoft shareholders might have been being hurt, and that would include some employees, but who do you think owned most of GameSoft?

That said, generally speaking, if I believed in a company enough to want to own shares at a given price, I'd want people to short sell it to suppress the price further for me.

 

[kom526]

Apparently a lot of daytrading apps are blocking the sale of GME


I smell class action.

@Tilted @Toxick

Wh00p! Dey it is!

 

[Tilted]

@Tilted @Toxick

Wh00p! Dey it is!

Thanks, not surprising. It likely would have faced lawsuits either way. The bigger issue for Robinhood, I think, is the reputational damage.

 

[GURPS]

How were they picking on GameStop?

Ah over shorted by 140% Game stop was over shorted for more stock in circulation


I also heard Game Stop was under valued with all the new consoles coming out