Posted on 01/27/2021 6:50:03 PM PST by SeekAndFind
Users of the subreddit r/WallStreetBets are fighting back against the multi-billion dollar hedgefunds in a rather creative way. GameStop became one of the most shorted stocks on Wall Street last week, after a newsletter from a short seller, Andrew Left of Citron Capital, encouraged people to short the company. Gamestop had a short interest of 102% of its shares, making it one of the most shorted on the market.
To “short” a company is to bet on the price of the stock falling, in simple terms. The hedgefunds would borrow shares of the company from other investors, sell the shares on the markets at the current high price, then buy them back at the expected future low price, and return them to the investors, pocketing a profit.
In response, the users of the subreddit saw a perfect opportunity to “own” the hedgefunds, as the newsletter from Left allegedly noted some of them buying GameStop stock. By buying GameStop stock, they could initiate a “short squeeze,” sending the price of the stock up, and forcing the hedgefunds to buy more of the stock to cover themselves.
Who is winning the war:
Most shorted names exploding higher, as top hedge fund position plummet pic.twitter.com/aEGnf5eCbH
— zerohedge (@zerohedge) January 27, 2021
The stock was then bought enmasse, with GameStop ending up as the most traded equity on the planet on Tuesday, beating out Apple, Tesla, and Microsoft. As a result, the price skyrocketed by hundreds of percent, and one of the hedge funds, Melvin Capital Management, had to be bailed out for $2.75 billion. The stock price went even further up after Elon Musk, the CEO of Tesla, tweeted out “Gamestonk.”
THEY DID IT: $GME was the most traded equity on the planet today w/ $20b in volume, more than $SPY, $AAPL and even the Mighty $TSLA. Surreal. pic.twitter.com/UxJPttsg4t
— Eric Balchunas (@EricBalchunas) January 26, 2021
Other stocks from “failing” companies that were targeted for shorts have also been boosted by the self-proclaimed “degenerates.” These include AMC, the cinema company who have been shut since the pandemic, BlackBerry, the makers of the popular phones from 10 years ago, and Nokia, another previous mobile phone giant.
Understandably, many on Wall Street and in the traditional financial media were very upset with the action taken on the GameStop stocks, comparing it to “cheering on hackers” defacing websites. NASDAQ’s Adena Friedman even claimed that they would halt trading on certain stocks if they match “social media chatter” with “unusual” stock activity, and a number of trading exchanges banned trades on GameStop and other stocks.
One Wall Street hedgefund trader told the New York Post that the situation was a “bloodbath,” and expressed his frustration that the “unwashed masses have figured out how to play the shorts” and beat them at their own game. “It’s f**king carnage,” he added.
Jennifer Epstein, Bloomberg’s White House reporter, asked Jen Psaki about what the Biden administration’s response to the rise in GameStop stock was, and asked if there had been “any conversations with the SEC about how to proceed.” Psaki replied by repeating that the Biden administration had appointed the first female Treasury Secretary Janet Yellen, and that Yellen and the White House economic team would be “monitoring the situation.”
Biden White House Press Secretary asked about GameStop, AMC and Blockbuster stock market drama.
She responds by reminding everyone that they have the FIRST FEMALE treasury secretary & says they’re “monitoring the situation.”pic.twitter.com/Lu2PR6NAdd
— The Columbia Bugle 🇺🇸 (@ColumbiaBugle) January 27, 2021
With the subreddit potentially coming under threat, WSB Chairman, an unofficial Twitter account for the subreddit, argued that if the subreddit was taken down for its role in the short squeeze, then “they better take down every single Wall Street hedge fund that has been endlessly using gangster tactics to make a quick buck.”
If they take down WallStreetBets, they better take down every single Wall Street hedge fund that has been endlessly using gangster tactics to make a quick buck.
— WSB Chairman (@WSBChairman) January 26, 2021
Some did come to the defence of the GameStop investors however. Speaking on CNBC, Chamath Palihapitiya, the CEO of Social Capital, was asked whether there was anything wrong with “the integrity of the system” for the stock to go up so much.
“The lack of integrity in the system is the precursor that cause GameStop to be sold short 136%, and for people to pile on and destroy a company in front of our eyes. That feels pretty wrong, and pretty un-American if you ask me,” Palihapitiya replied. “The fact that [GameStop] shouldn’t be allowed to exist because all of a sudden we decide that they should be obliterated into the ground, that feels pretty wrong to me.”
Billionaire CEO Chamath Palihapitiya debates against CNBC's Scott Wapner on people investing in Gamestop stocks pic.twitter.com/MHtvcB9umw
— SOUND (@itsavibe) January 27, 2021
The Hill’s Saagar Enjeti highlighted that short sellers had been manipulating the market for years, using the media to “force massive runs on well meaning companies all so they can make billions on the flip side… leeching off the American financial system,” and now they were upset at having the game flipped back on them by what he describes as the financial markets first “populist uprising.”
When Hedge Funders and others loot our markets its all good. But when retail investors destroy a hedge fund then all of a sudden CNBC analysts start calling for regulation, blame foreign powers, and talk "fundamentals"
I call BULLSHIT: https://t.co/DzoUsyy1T6 https://t.co/SxSksAu6oT
— Saagar Enjeti (@esaagar) January 27, 2021
Of course, the second biggest winners of the whole situation, just behind the users of r/WallStreetBets, are those who are simply sitting back and watching everything unfold with a bucket of popcorn.
It’s a state of the art video game distributor pic.twitter.com/372VHBWuQV
— LeftyCrypto🌹 (@LeftyCrypto) January 26, 2021
Pov: you just bankrupt a hedge fund pic.twitter.com/JdcUF21oYV
— puma (@OpticsPolice) January 27, 2021
businessmen after having a 2 hour crying fit because of redditors: pic.twitter.com/SNTNvDvVBF
— atrophy wife 🎀 (@zuza_real) January 27, 2021
Love it!
It probably means they are going to try to nullify the trades and restore the stocks back to last Friday's close.
It's probably highly illegal and unethical to confiscate these people's private property like that, but the rulers want their crown jewels back, even if they had to hock them to pay off their debts.
-PJ
The HOA failed to pay the property taxes on the road and the property went up for auction. The couple bought it, and then stayed quiet about it for two years before demanding the residents pay them rent to use the road.
The residents were furious and went to the San Francisco city council and demanded the return of their road. The courts nullified the sale and gave the street back to the rich folks.
I expect the same will happen with these stocks. The sales will be canceled, including the shorts, and it will be like nothing happened.
Except that it did.
-PJ
...and now they were upset at having the game flipped back on them by what he describes as the financial markets first “populist uprising.”
—
The elites again have their castle breached by the commoners and they don’t like it.
And they have much better access than you or I to printed, fiat, zero-interest money from the Federal Reserve. The system is rigged in their favor.
If people are led to believe whatever they purchase in the stop market can be overturned at any time, I want to watch the markets crash and crash hard.
At this time. But it seems the media and political forces aren't happy about this change of events. These could be Trumpsters (doubtful but possible some are) making a profit which infuriates them to no end.
They feel invincible right now.
-PJ
And THAT will lead to a class action lawsuit. There isn’t the slightest thing illegal, or even unethical about this. It is exactly, precisely, what the hedge fund is doing.
The geeks aren’t selling. They’re holding. In the meantime the company has a huge inflow of capital to stay afloat. It’s win win for the gamers and the game store. It’s lose lose for the vulture capitalists.
Might be time to buy some GameStop and AMC stock.
LOL!
For every buyer, there must be a seller.
The problem is when you reverse the process and sell before buying. Like the old timeshare scandals of the 80s, they short sold more shares than exists, and the true buyers are not selling.
The hedge funds got beaten at their own game, and they're running the referee to throw the flag. Like in the movie The Blind Side, the penalty will be "excessive blocking holding."
I think the elite will demand their money back, one way or another.
-PJ
HOLD!
True, but each person (that’s the difference) will lose a couple hundred bucks. Theses are very small positions per person
True, but each person (that’s the difference) will lose a couple hundred bucks. Theses are very small positions per person
True, but each person (that’s the difference) will lose a couple hundred bucks. These are very small positions per person
I haven't heard about GameStop receiving a capital infusion. If its stock price rises it means the market value is rising, but that capital gain for stockholders doesn't ipso facto translate into an equity or cash injection for the firm. If GameStop was able to sell treasury shares into this rising market, THEN it would benefit directly.
I think you have it all wrong.
When the price of GameStop ran up from $20/share to $380/share there had to be investors buying at $380. These weren’t amateurs buying in at $380/share. Most of the stock sales at the inflated price were being made to buyers who were FORCED to pay that exorbitant price — i.e., hedge funds that had shorted the stock weeks or months ago and had to meet margin calls because they had borrowed heavily to sell them short in the first place.
If the losers in this kind of fiasco were “a bunch of millenials with no investing experience,” you wouldn’t be seeing big-time players on Wall Street falling all over themselves to put an end to it.
Yep. Basically what happend was that some savvy investors on Reddit had spotted GameStop being over shorted by more than 100% of the available shares, creating a highly unstable situation. They knew that a modest increase in the stock price would quickly cascade into a series of margin calls that cannot possibly all be met. The hedge funds are being forced to buy back the shares, bidding the stock price higher and higher as they fight each other to grab the insufficient number of available shares.
Naked shorts are ILLEGAL. (The SEC just looks the other way.) Now it is biting the hedge funds in the ass.
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