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

 

[Thesolcity]

WE LIKE THE STOCK

 

[FAST6191]

That alone should be illegal - I shouldn't be able to borrow 15 apples from you and sell them on the promise that I'll buy you 15 apples later if you only have 10 apples yourself.

That does seem like 90% of the way to a futures contract which is generally considered a fairly acceptable way to do business, and is selling things that don't yet exist and indeed may never exist (my otherwise winning apple tree got worms in it and all that).

 

[DeMoN]

Shorting +/- 140% of all available stock *might* be a good indication of that being the intention. That alone should be illegal - I shouldn't be able to borrow 15 apples from you and sell them on the promise that I'll buy you 15 apples later if you only have 10 apples yourself. I don't know how this situation is even remotely confusing.

140% short interest does not mean necessarily mean naked shorting was going on. It could mean the same share was lent out in a chain. For example, A lends a share to B, who short-sells it to C. C lends that share to D, who shorts it to E. There's only 1 share but the SI is 200%.

Now let's say the stock becomes super-valuable. A and C will both want the share back, but B and D no longer have it. Only E has the share, and he thinks he can price-gouge B&D for it. But instead of buying the share from E, B&D can instead pay back A&C using cash collateral. So now E is stuck with the share which has lost value because B&D no longer owe the share to A&C.

The SI number has decreased to 113% in mid-January. We won't know the new numbers until Feb. 9. I suspect if it's less than 100%, then Redditors will begin to lose hope of a squeeze. Though as I just demonstrated, the SI is kinda meaningless anyway. The more important piece of information is what the average cost basis of the shorts is, but this is hidden.

 

[White_Raven_X]

I cashed in and bought SIS, AMD, FLT, Dr, V (VISA), MAXR, ONEX and BLX. I'm in for the long run with these though.

 

[smf]

I don't get why you are complaining about why people can't benefit from short squeeze.

You shouldn't be able to benefit by manipulating the market past beyond it's normal operation. So if you orchestrate a short squeeze then you shouldn't be able to benefit from it.

The SI number has decreased to 113% in mid-January. We won't know the new numbers until Feb. 9. I suspect if it's less than 100%, then Redditors will begin to lose hope of a squeeze.

Is there any way that the figures could (legally or illegally) have been artificially inflated, to trick people into buying up all the stock? That would be an interesting twist.

Maybe a couple of hedge funds got together, laid out their plan and ended with the magic disclaimer "this isn't advice, I'm an idiot" which of course is a legally recognized disclaimer that allows you to avoid security fraud....

 

[Foxi4]

I mean specifically if everyone can see the stock is shorted 100% then both sides of the trade are in the wrong if the stock gets shorted. You shouldn't be able to benefit from a short squeeze that you created, or at least the benefit should be limited in some way.

Why? The whole point of short selling is indicating to other traders that the stock is overvalued. If I believe it is valued correctly, or even undervalued, I should be able to challenge that assessment, and whoever turns out to be correct should walk away from that clash with the spoils. If it's not a visible statistic then it loses all meaning as a market tool, if it cannot be challenged then it distorts the market entirely. In both cases you may as well make shorts illegal altogether.

140% short interest does not mean necessarily mean naked shorting was going on. It could mean the same share was lent out in a chain. For example, A lends a share to B, who short-sells it to C. C lends that share to D, who shorts it to E. There's only 1 share but the SI is 200%.

Now let's say the stock becomes super-valuable. A and C will both want the share back, but B and D no longer have it. Only E has the share, and he thinks he can price-gouge B&D for it. But instead of buying the share from E, B&D can instead pay back A&C using cash collateral. So now E is stuck with the share which has lost value because B&D no longer owe the share to A&C.

The SI number has decreased to 113% in mid-January. We won't know the new numbers until Feb. 9. I suspect if it's less than 100%, then Redditors will begin to lose hope of a squeeze. Though as I just demonstrated, the SI is kinda meaningless anyway. The more important piece of information is what the average cost basis of the shorts is, but this is hidden.

I think we've explored that bit earlier. You're right, we have to wait and see how this plays out before we can draw conclusions.

 

[socialbacon]

I suspect if it's less than 100%, then Redditors will begin to lose hope of a squeeze.

I'm not so sure about that. Most of the Redditors are well-informed on the 2008 VW short squeeze that was squoze with merely 45% of the stocks being shorted.

This situation is huge.

 

[leon315]

@All tempers and @Plasmaster09:

through the research i did those last days, i maybe got the idea about big picture, so to play fair and right I might hold my GME stocks right? instead selling them for quick cash when price raises?

all just to face slap Melvin investments and Citron??

 

[xdarkx]

You shouldn't be able to benefit by manipulating the market past beyond it's normal operation. So if you orchestrate a short squeeze then you shouldn't be able to benefit from it.

Again. The same can be said about short sellers. They have been manipulating the market to short sell a lot of companies. I'm not sure how much research you have done, but doesn't seem like you done much. Do yourself a favour and do some research before replying to this thread again.

 

[Foxi4]

@All tempers and @Plasmaster09:

through the research i did those last days, i maybe got the idea about big picture, so to play fair and right I might hold my GME stocks right? instead selling them for quick cash when price raises?

all just to face slap Melvin investments and Citron??

They're your shares, you should do what's right for you.

 

[smf]

Again. The same can be said about short sellers. They have been manipulating the market to short sell a lot of companies.

Short selling isn't considered manipulation.

Orchestrating a short squeeze might be manipulation and it's very likely that if wsb wasn't anonymous then some people would actually be prosecuted.

You might think that it's unfair that short selling isn't manipulation and diamond hands/to the moon is retribution, but I'm not sure if legally that is how it would play out in a court

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

through the research i did those last days, i maybe got the idea about big picture, so to play fair and right I might hold my GME stocks right? instead selling them for quick cash when price raises?

all just to face slap Melvin investments and Citron??

https://news.sky.com/story/gamestop...-people-investing-in-gaming-retailer-12203929

"While this will be short-lived… everyone's got to be really careful, because it's going to be like catching a falling knife when it unravels."
He said that while he admired the actions of the smaller investors, the hedge funds would eventually put a stop to it.
"The danger is that Wall Street and hedge funds especially are experts at identifying what we call 'inefficiencies in the market'," he said.
"This is an inefficiency in the market right now and they will look to close that inefficiency very quickly."
One investor posted screengrabs on Reddit suggesting he had turned an initial investment of $53,566 (£39,061) into one worth more than $25m (£18.2m) at one point this week.
Adding to the joy of those investors - which includes another group on the social media platform TikTok - has been the discomfort of those on the losing side of the trade.
Belfort likened the smaller investor's moves to the scheme he was infamously involved in.
"This is 1999 all over again and that's why I'm begging everyone to please be careful here," he said.
"When the average person gets in, that's the time it's going to actually crash.
"You never know when that moment's going to come. It's going to come, of course, because things will eventually see their fundamental value.
"It's a wonderful opportunity for people to make money - everyone's bored and locked up - but just be careful and make sure whatever you invest in these type of hot stocks, make sure you invest only what you can afford to lose.
"And if you happen to make money, pull the original investment out and play with the house's money. That's my advice to everybody."

 

[xdarkx]

Short selling isn't considered manipulation.

Orchestrating a short squeeze might be manipulation and it's very likely that if wsb wasn't anonymous then some people would actually be prosecuted.

You might think that it's unfair that short selling isn't manipulation and diamond hands/to the moon is retribution, but I'm not sure if legally that is how it would play out in a court

https://www.reuters.com/article/us-hongkong-court-citron-idUSKCN1QF1P0

There are other examples as well if you actually bother researching.

 

[smf]

https://www.reuters.com/article/us-hongkong-court-citron-idUSKCN1QF1P0

There are other examples as well if you actually bother researching.

He is a short seller that was accused of manipulating the market, short selling is not manipulation.

Left, founder of U.S.-based short-seller Citron Research, was banned in 2016 after he was found culpable of market misconduct in connection with the publication of a research report on Chinese property developer China Evergrande Group.

http://csj.hkics.org.hk/site/2017/0...rket-an-analysis-of-the-citron-research-case/

The people saying gamestop is going to the moon would appear to be just as misleading.

 

[xdarkx]

He is a short seller that was accused of manipulating the market, short selling is not manipulation.

Left, founder of U.S.-based short-seller Citron Research, was banned in 2016 after he was found culpable of market misconduct in connection with the publication of a research report on Chinese property developer China Evergrande Group.

http://csj.hkics.org.hk/site/2017/0...rket-an-analysis-of-the-citron-research-case/

The people saying gamestop is going to the moon would appear to be just as misleading.

First of all, not once did I say short selling is market manipulation in this entire thread. In my last few posts, I said short sellers are manipulating the market to short sell a lot of companies. In other words, I'm saying the short sellers themselves are the ones doing the manipulating (why is it so hard to understand that).

As for the Citron example, you can check the following reports:
https://www.mmt.gov.hk/eng/reports/Evergrande_Report.pdf
https://www.mmt.gov.hk/eng/reports/Evergrande_Report_PartII.pdf

I highly doubt you would be convinced even if all the evidences are stacked against them. Better yet, I doubt you would be convinced of any short sellers of doing anything wrong.

I'm not going to bother arguing with you on this anymore. You either take it or leave it.

 

[Foxi4]

The people saying gamestop is going to the moon would appear to be just as misleading.

Gamestop's shares have increased in value by 7796% in the last 12 months. By any statistical measure $GME is already on the Moon, at this point it's heading to Mars. Now, how this was achieved is another story entirely, but all things considered, people who bought in early have absolutely nothing to complain about, and those who bought in fairly late still have good prospects of profit in the short term.

 

[tabzer]

 

[Foxi4]

View attachment 244437

Washington Compost at its finest.

 

[FAST6191]

Washington Compost at its finest.

You say that but I would feel bad lining the bird cages with such a thing.


Anyway bets on moves taken to try to keep the plebs out and upcoming "sophisticated investor" requirements, and whether those in play will deal a) with foreign markets not playing ball and b) loss of the funds that those spunking money away on such things brought in.

 

[Plasmaster09]

Washington Compost at its finest.

And considering these smear tactics aren't working, I guarantee they're Washington Pissed.

 

[smf]

By any statistical measure $GME is already on the Moon, at this point it's heading to Mars. Now, how this was achieved is another story entirely, but all things considered, people who bought in early have absolutely nothing to complain about, and those who bought in fairly late still have good prospects of profit in the short term.

What people are talking about as "to the moon" is in the tens of thousands to millions of dollars per share.

If you bought in at $10 then sure you've done well and I don't care about that.
If you bought in at $469 are trying to pump the stock up so you can sell your single share and buy a lambourghini then you can eat shit.

Some of the shorts appear to have been closed with new shorts opened with a later date, so I'm not sure what the prospects are of someone coming in late. IG group in the UK won't let you place any orders for gamestop or amc now.

https://www.fnlondon.com/articles/l...op-and-amc-due-to-extreme-volatility-20210130