GameStop, the world's biggest retail video game chain has had a wild and turbulent 12 months to say the least. As the video game market continues on its inevitable trek to becoming more and more of an entirely digital industry, GameStop has clearly been struggling to adjust to the changes. GameStop drama has been covered here on GBAtemp in the past, from its switch to focusing on merchandise and legacy games, to its decision to remain open following the COVID-19 pandemic, to its reversal of that decision. However, perhaps GameStop's craziest story has very little to do with the financial success of the company itself.

Prior to this month, GME (GameStop's stock ticker)'s 5 year high was approximately $33 in April of 2016. However, that figure drastically plunged down to under $4 in 2020. This month however, that figure has absolutely skyrocketed above anybody's expectations--closing out today (January 27th) at $347.23 a share. Many factors went into this large stock price; primarily a battle waging between investors of the /r/wallstreetbets subreddit and the short seller Melvin Capital. In essence, Melvin is betting that the stock price will fall below $60 by Friday, while hundreds of thousands of investors on /r/wallstreetbets have been rallying together to keep the price above $60 in hopes that it will skyrocket even further. Allegedly, "$1,000 GME by EoW is not a meme!"

Always remember to invest at your own risk, and know that nothing posted on GBAtemp or /r/wallstreetbets regarding this situation should be construed as financial advice.

Source

 

[Foxi4]

Everybody learns somewhere, just because you have the luck of gaining experience and it going ok for you then don't judge people who haven't.

Some on wsb are pretending it's a moral issue and that morals are on their side. What wsb are posting is that there are no risks, the prices will go to infinity (and beyond probably).

That is fine, as long as they weren't posting about diamond hands and hold until death while executing their trades.

It's funny to me that the free market and rampant capitalism have redistributed more wealth in one week than any socialist policy in history, and they would've done more if they weren't artificially restricted before prime time. You wanted to tax the rich, WSB and other groups like it have taxed the rich to the tune of 71 billion dollars in one month. That, versus a $600 check and a promise of "maybe" $1400 later down the line, and constant government bailouts after hedge funds make bad bets, create bubbles and destroy countless lives in the process. You're making it hard for me not to root for the actual Robin Hoods, even if they're skimming a bit off the top for themselves. I don't think we'll see eye to eye on this.

https://finance.yahoo.com/news/losses-short-positions-u-firms-134105387.html

 

[smf]

You're making it hard for me not to root for the actual Robin Hoods

I'm not sure there are any robin hoods, it would seem there are people stealing from the rich and poor and keeping it for themselves.

The hedge funds are losing money to the people they borrowed the shares off when they shorted them. So one set of rich guys get richer from the another set of rich guys. That doesn't go to the poor.

When it all collapses the late comers will be poorer than they started.

 

[Foxi4]

I'm not sure there are any robin hoods, it would seem there are people stealing from the rich and poor and keeping it for themselves.

They're not stealing anything. They're responding to an irresponsible move on the market, and they're laughing all the way to the bank. Good on them.

 

[smf]

They're not stealing anything. They're responding to an irresponsible move on the market, and they're laughing all the way to the bank. Good on them.

Well you mentioned "actual Robin Hoods" & that means they steal from the rich to give to the poor.

I'd argue that anyone posting about diamond hands because they are trying to keep the price high for when they sell, is stealing.

 

[GhostLatte]

Well you mentioned "actual Robin Hoods" & that means they steal from the rich to give to the poor.

I'd argue that anyone posting about diamond hands because they are trying to keep the price high for when they sell, is stealing.

Go tell on me then since I’m “stealing”

 

[Chary]

If you want to get really technical there are some people using their profits to donate. Especially the Doge side, where they had markers to push the value to and they’d give part to charity organizations.

 

[Foxi4]

If you want to get really technical there are some people using their profits to donate. Especially the Doge side, where they had markers to push the value to and they’d give part to charity organizations.

The same applies to WSB. It is not uncommon to see users pledging a percentage of their gains to charity, and posting receipts once they do donate. In fact, they've been doing so consistently for *years* just based on a cursory Google search. There are countless threads of people donating to various causes, not that I consider that to be a necessary element of the equation.

 

[ThatGamingAirman]

GameStop, the world's biggest retail video game chain has had a wild and turbulent 12 months to say the least. As the video game market continues on its inevitable trek to becoming more and more of an entirely digital industry, GameStop has clearly been struggling to adjust to the changes. GameStop drama has been covered here on GBAtemp in the past, from its switch to focusing on merchandise and legacy games, to its decision to remain open following the COVID-19 pandemic, to its reversal of that decision. However, perhaps GameStop's craziest story has very little to do with the financial success of the company itself.

Prior to this month, GME (GameStop's stock ticker)'s 5 year high was approximately $33 in April of 2016. However, that figure drastically plunged down to under $4 in 2020. This month however, that figure has absolutely skyrocketed above anybody's expectations--closing out today (January 27th) at $347.23 a share. Many factors went into this large stock price; primarily a battle waging between investors of the /r/wallstreetbets subreddit and the short seller Melvin Capital. In essence, Melvin is betting that the stock price will fall below $60 by Friday, while hundreds of thousands of investors on /r/wallstreetbets have been rallying together to keep the price above $60 in hopes that it will skyrocket even further. Allegedly, "$1,000 GME by EoW is not a meme!"

Always remember to invest at your own risk, and know that nothing posted on GBAtemp or /r/wallstreetbets regarding this situation should be construed as financial advice.

Source

Watch out guys you maybe included in a FBI investigation because what you guys did was super illegal in the eyes of Wall Street.

 

[SG854]

They are demonstrating that they are just as bad or worse than the people they imagine are their enemy.

Actually yes, it can get much worse. Anarchy is not an ideal system and capitalism isn't going to go away because of a couple of hedge funds going bankrupt.

They? Who the Fuck is they? There's thousands of people on WSB.

If you look at a state there's thousands of people that live in that state, you are going to get many different types of people. You'll get actors, doctors, serial killers, rapists, musicians, priests, computer technicians, good people and bad. You get a whole host of people. Its fucking stupid and manipulative of you to look at a few bad apples when wsb has thousands of people with many different personality types. To refer wsb as "they" which is an easy lazy way to lump all people there as the same, saying they are just as bad as the enemy is stupid. You should not hate an entire race because a few people in that race does bad things. You should not hate an entire country because few dumb people live there.

Your attack only works if wsb was unbalanced and all people thought the same. But doctors, garbage men, gymnast, basketball players, restaurant workers all don't think the same. The people that short sell over 100% got themselves in this mess and are getting fucked hard right now.

--------------------- MERGED ---------------------------

It's funny to me that the free market and rampant capitalism have redistributed more wealth in one week than any socialist policy in history, and they would've done more if they weren't artificially restricted before prime time. You wanted to tax the rich, WSB and other groups like it have taxed the rich to the tune of 71 billion dollars in one month. That, versus a $600 check and a promise of "maybe" $1400 later down the line, and constant government bailouts after hedge funds make bad bets, create bubbles and destroy countless lives in the process. You're making it hard for me not to root for the actual Robin Hoods, even if they're skimming a bit off the top for themselves. I don't think we'll see eye to eye on this.

https://finance.yahoo.com/news/losses-short-positions-u-firms-134105387.html

Funny how the people who are pro capitalist aren't pro capitalist. They get a nice bailout when bidding on the wrong thing. They are not consistent with their ideology and change to whatever suits them best at the time. One day they are pro capitalism, no minimum wage laws, another day they are pro regulation, regulate their competition. The main goal is money and whichever ideology can get them the most money at different scenarios and a switch ideology based on a scenario presented at them to maximize profits.

 

[Plasmaster09]

They? Who the Fuck is they? There's thousands of people on WSB.

If you look at a state there's thousands of people that live in that state, you are going to get many different types of people. You'll get actors, doctors, serial killers, rapists, musicians, priests, computer technicians, good people and bad. You get a whole host of people. Its fucking stupid and manipulative of you to look at a few bad apples when wsb has thousands of people with many different personality types. To refer wsb as "they" which is an easy lazy way to lump all people there as the same, saying they are just as bad as the enemy is stupid. You should not hate an entire race because a few people in that race does bad things. You should not hate an entire country because few dumb people live there.

Your attack only works if wsb was unbalanced and all people thought the same. But doctors, garbage men, gymnast, basketball players, restaurant workers all don't think the same. The people that short sell over 100% got themselves in this mess and are getting fucked hard right now.

--------------------- MERGED ---------------------------


Funny how the people who are pro capitalist aren't pro capitalist. They get a nice bailout when bidding on the wrong thing. They are not consistent with their ideology and change to whatever suits them best at the time. One day they are pro capitalism, no minimum wage laws, another day they are pro regulation, regulate their competition. The main goal is money and whichever ideology can get them the most money at different scenarios and a switch ideology based on a scenario presented at them to maximize profits.

Thousands? More like several million.

 

[leon315]

Tempers, similiar situation certainly happened in the past, just wonder in this similiar scenario, how long/days will last before complete reset??
Anyone has a theory?

 

[Foxi4]

Tempers, similiar situation certainly happened in the past, just wonder in this similiar scenario, how long/days will last before complete reset??
Anyone has a theory?

There are far too many random and unpredictable factors to make any kind of a reliable prediction. My best guess is that the decline will be fairly slow. During the VW squeeze and similar events the price point didn't drop back down to its "normal level" for a long time, it stayed pretty much exactly at the same level as before the spike. We still don't even know if we'll see a spike or not due to all the trading restrictions - they'll undoubtedly extend the length of the process and delay reaching critical mass, if it even gets there at all. All that is certain is that $GME has managed to close at $320+ yet again in spite of attempts to suppress it by just about every level of the financial ecosystem, from brokerages all the way to clearing firms.

 

[tabzer]

There are far too many random and unpredictable factors to make any kind of a reliable prediction. My best guess is that the decline will be fairly slow. We still don't even know if we'll see a spike or not due to all the trading restrictions - they'll undoubtedly extend the length of the process and delay reaching critical mass, if it even gets there at all. All that is certain is that $GME has managed to close at $320+ yet again in spite of attempts to suppress it by just about every level of financial infrastructure, from brokerages all the way to clearing firms.

Creating artificial scarcity when people want something will have an opposite intended affect. What needs to be done, to satisfy their apparent goal, is to convince everyone that nobody wants it.

 

[Foxi4]

Creating artificial scarcity when people want something will have an opposite intended affect. What needs to be done, to satisfy their apparent goal, is to convince everyone that nobody wants it.

I'm no expert, but to me this was clearly an attempt at allowing short sellers to pick up as many shares as they possibly can to help them in closing their positions. I suspect we would've seen a number of squeezes both on Thursday and Friday if these restrictions weren't put in place. With that said, the brokerages also need to retain solvency in the event people suddenly wish to cash out. There are many reasons, some good and some bad, why the events played out the way they did. The saga continues on Monday, we'll see where this goes.

 

[tabzer]

Good point. The short term intention was clearly what you are suggesting. The long term plan is probably akin to what I assumed.

 

[smf]

With that said, the brokerages also need to retain solvency in the event people suddenly wish to cash out. There are many reasons, some good and some bad, why the events played out the way they did. The saga continues on Monday, we'll see where this goes.

I don't think anyone is doing anything evil yet. The amount of people flooding in because they saw a video on youtube saying the stocks would be worth an infinite amount have stressed the entire system. It's the diamond hands/to the moon memers that are responsible for that.

But something unusual is bound to happen.

 

[JustBrandonT]

Haven't seen anyone discuss how it got to 140% in the media or here.. but I will explain what I know (note I do NOT work in the Financial Market and I'm not a Financial Advisor).. Feel free to correct wherever my understand is wrong.

There are two ways to short a stock 140%. One is legal, the other isn't.
1. Recursive Shorting of the same stock.
2. Naked Short - Brokerage/Investor lending shares that they don't own.

Scenario 1 (recursive short):
The recursive shorting happens when:
1. GBATemp has a shares of GME.
2. GBATemp instructs their broker that the shares can be lent out (someone can borrow them).
3. Melvin comes along and borrows those shares and immediately sells them (short) and waits for the price to drop.
4. Apple was the buyer of Melvin's short shares. They too instruct their broker to lend them out.
5. Citadel comes along and borrows Apples shares and sells them short and waits for the price to drop (short).

This is a recursive short because the same shares has been shorted TWICE. Once by Melvin and once by Citadel. Thus the value of short interest in the shares are now 200% above float value.

If GBATemp and Apple calls (meaning they want their shares back), it means Melvin and Apple have to buy the shares back immediately in order to return them since they borrowed them initially. The caller of the shares can leave them shorted infinitely as there is no limit on how long you can short some shares.. However, the longer you hold the borrowed shares, the more interest you have to pay to the original owner of the shares (it's like a loan from the bank [in this case, the original owner]). The problem now comes when the owner of the shares call (they want it back immediately + the interest).

Now how did they get to the squeeze? Well Reddit comes along and BUYS all the shorted shares! That leaves no shares on the market for Citadel and Melvin to buy in order to cover/pay-back their borrowed shares. This is known as a short squeeze because it drives the share price up since there is such high demand.

Not only that, but the more Melvin and Citadel buys, the more the price goes up as well.. it recursively goes up. This becomes a "gamma squeeze" because the price can rise "infinitely" since they are above 100% short interest! This is truly why they're fucked.


Scenario 2 (naked short - SEC has regulations to prevent this):
1. GBATemp has shares of GME.
2. GBATemp instructs their broker that the shares can be lent out (someone can borrow them).
3. Melvin wants to borrow the shares and puts up for a short sale.
4. The broker executes a transaction for the short sale but does NOT actually borrow the shares (this is illegal as of 2008, but there are loopholes!).
5. If a broker sells shorts on shares they do NOT own, they have 3 days (settlement period) to find those shares in order to guarantee sale. The short sale cannot go through if they can't deliver (Failure to Deliver - FTD). BUT the transaction can still remain open OR the buyer can be credit with the shorted shares in advanced of the seller acquiring them! This is granted by DTC (trust and clearing firm).
6. If other investors want to short the same shares, the short interest on the shares goes up.

So how can step 5 even happen? FTD can happen for many reasons and therefore doesn't always equate to Naked Shorting. And there lies the loophole. The sale can be open for as long as possible and someone comes along and buys those shares.. that means the sale points to shares that don't even exist on the market since all have already been sold and the transaction is still outstanding.
This can literally drive a company into bankruptcy (which is what shorts want, so they can cover at the lowest price ever.. near $0).


Let this sink in: Melvin Capital had their short transactions open for ~3 months (not 3 days as per requirements). Above 120%..
Total short interest in GME was at one point 140% until the Robinhood restricted buying to create an artificial sell off which would trigger a real sell off and crash the stock so the shorts can get out of the infinite upward spiral.

Retail investors saw this (absolutely brilliant/genius strategy), bought all shares and now the shorts are forced to buy at a high price to cover (it's going to be extremely hard to cover 140% where 40% is synthetic shares lol).

 

[smf]

During the VW squeeze and similar events the price point didn't drop back down to its "normal level" for a long time

It was at least a company that was making money and the spike was only 5x it's normal level, Porsche also helped everyone out of the squeeze.
.
Gamestops normal level is around $25. I don't think you can compare the two.

This can literally drive a company into bankruptcy (which is what shorts want, so they can cover at the lowest price ever.. near $0).

Shorts don't "want" companies to go bankrupt and in most cases the value that a share is being traded at makes no difference to the company involved. It can actually be good for some companies if they can actually buy the stock back at a cheaper price.

 

[Foxi4]

It was at least a company that was making money and the spike was only 5x it's normal level, Porsche also helped everyone out of the squeeze. Gamestops normal level is around $25. I don't think you can compare the two.

This situation isn't comparable to anything else in history, all we can go by are similar, not analogous, events.

Shorts don't "want" companies to go bankrupt and in most cases the value that a share is being traded at makes no difference to the company involved. It can actually be good for some companies if they can actually buy the stock back at a cheaper price.

Half-truth. Shorting a stock is a baked-in market mechanism for adjusting the price of an overvalued stock, it can be beneficial to customers and investors alike. It can also be weaponised specifically in order to push a company out of business on purpose - once a company goes bust and becomes delisted, the short seller can pocket the entirety of the pot and does not have to pay back the lender. In fact, this is an ideal scenario for a short seller, which is one of the reasons why they jumped on Hertz like hungry hounds at the beginning of the pandemic.

https://www.investopedia.com/ask/answers/maintain-short-position-delisted-stock/

 

[JustBrandonT]

Shorts don't "want" companies to go bankrupt and in most cases the value that a share is being traded at makes no difference to the company involved. It can actually be good for some companies if they can actually buy the stock back at a cheaper price.

Can you explain that part? Afaik, the shorts would want the price as low as possible for maximum profit..
If they borrowed 1000 shares at $20, for a total of $20,000, and sold them. Then bought them back later at $1 each.. they'd gain $19,000 minus interest on the short.

If they borrowed 1000 shares at $20, for a total of $20,000 and sold them. Then bought them back later at $5 each.. they'd gain $15,000 minus interest on the short.

Why would you NOT want the company near bankrupt after shorting at a higher position?