Wall street institutions getting their asses handed to them by gamers

[rob4001]

So as this is mostly British site but a little recap. Game stop is a bricks and mortar video game shop similar to Game in the UK. Obviously retailers have been suffering through covid. However a couple of guys bought them large share stake in September with hopes of saving them and turning their business around. Since then they have increased digital sales by 300%. Wall street however took a large short selling position on most of the shares in the company. (They make profit when the share price falls and massive losses when the share prices rises) expecting them to go bankrupt.

However long story short a post on reddit gave linked below gave reasons why people should go long and invest in the company and the whole thing kind of escalated into a battle between retail investors/gamers and short sellers
cut a long story short the share price is up 400% in January and retail investors have been making a killing while shorts have been making massive losses ( The terminology is a short squeeze)

https://www.reddit.com/r/wallstreetb...nuary_26_2020/

[rob4001]

https://wealthpress.com/retail-army-...d-hedge-funds/

[Terbinator]

Incredible, really.

I was following this from the 10th-ish and kind of crazy to see it is still going, and was going, way before then. There's a Twitter post out there of the Discord and it's like the NYSE floor crossed with a game lobby.

[kalniel]

Presumably there are also Wall street funds who bet long and are more than happy to nudge reddit in their favour too.

[Saracen999]

Speculators getting a right pasting? Oh, no. I'm gutted ..... because I forgot my popcorn.

[b0redom]

Amusing though this is, the underlying fundamentals will not have changed (certainly not enough to make it worth its current valuation), and at some point in the reasonably near future the stock will tank as people start to pull money out of it. It's all LOLs until the Reddit folks lose money.

It is interesting to see that unaffiliated Internet groups are now able to effect stock price change in the way institutions have been doing for decades though.

[Zhaoman]

A classic pump and dump. The sad thing is when ordinary people pulled in by this lose all their money when the stock tanks. Seen it all before.

[cheesemp]

A classic pump and dump. The sad thing is when ordinary people pulled in by this lose all their money when the stock tanks. Seen it all before.

It does feel like that doesn't it but still nice to see short sellers losing big. I really think short selling should be banned though. Its betting on a company failing and in a sense actively encouraging it (would you invest or provide stock to a company that others are discreetly saying this will fail?).

[Saracen999]

A classic pump and dump. The sad thing is when ordinary people pulled in by this lose all their money when the stock tanks. Seen it all before.

Well, yes .... but ....

Maybe I'm overly cynical (and I don't need confirmation from those in the cheap seats ) but, I can't help but feel that any "ordinary" people that bought into this and get caught in a pump and dump got caught because, essentially, they got a bit greedy.

If you're to take those kind of speculative risks and get caught, take it as a life lesson. Rule #1 of 'investing' in that way - don't risk what you can't afford to lose. Stick it in solid if unspectacular shares instead, being aware you still take a risk, if a much smaller one.

If, however, ordinary Joe wants to buy in, watch it like a hawk then at least unload enough of his stock to protect initial capital, then he can (still at some risk) at least risk the gain.

The sad thing is these days, it's getting pretty hard even to make a modest risk-free return worth having. Premium bonds might not be a bad idea.

[sammyc]

The sad thing is these days, it's getting pretty hard even to make a modest risk-free return worth having. Premium bonds might not be a bad idea.

..just not as good an idea at 34,500/1 as they were pre December (24,500/1)

[TheAnimus]

You can't ban short selling, that's like saying no one can say a company isn't what it's trading at, whist being confident enough to put their money where their mouth is.

Firms like nutralife spring to mind.

[Pob255]

The way it's been short sold to over 100% does raise some questions to the legality of this.

Short selling can be good, my understanding is that short sellers were key in questioning the numbers Enron were giving that lead to the exposure of the near ponzi scheme they were running.

However short selling 140% of total existing shares should raise some massive legal flags and what really makes me cross is the way so much of the financial new reporting is basically painting the reddit group as bad guys and the root cause of this, when it's the hedge funds who have been consistently short selling gamestop since 2017 and consistently raising the size of the short until it hit such stupidly high % that allowed reddit to do this, if they hadn't driven the % to over 100% then it would of spiked but no where near this high.

As to this being pump and dump, it's sort of the opposite, at the start anyway, because reddit users jumped on the shares at low cost that the hedge funds need to buy back to clear the debts from short selling, it's the hedge fund that's racking up massive debts.
If you buy in now then you're a fool and you'll lose the money you invest, but never more.
the funny thing about this whole situation is that if the hedge funds had been less greedy then they would of lost some money but no where near as much, they were the ones taking the big risk.
the sad thing is that the hedge funds where the ones taking the big risk and consistently doubling down and now it's bit them on the they get bailed out, but if their short selling caused gamestop to collapse then you know no one would bail gamestop out.

[TeePee]

So funny story. I started reading about this last week, and threw a few grand in.

At this point, I'm just delighted to watch billionaires on TV complaining about how unfair it is. The real movement should happen on Friday through Tuesday. But that really depends. There are thousands of people who have already made a life-changing amount of money, and holding while risking that is a hard thing to expect them to do. I wouldn't be surprised if it collapses and the billionaires end up profiting at the expense of everyone else. But there is potential. Real potential, for these gains to continue.

[TeePee]

[Scuber]

However short selling 140% of total existing shares should raise some massive legal flags
.

This is the main highlight of the situation; it's essentially implying that their position was never intended to fail as it's technically not possible to settle, at a loss state. It comes across that the institution would assist this position to succeed as not to lead to aftermath that is being caused now. Therefore, the original position being high risk to medium reward becomes painted as low risk to medium reward, as manipulation was expected (feels like deja-vu to the 2008 crisis when high risk assets were merged into "low risk" groups.)

What's crazy about all of this, these absurd positions made by hedge funds are freely visible and have been for a long time.

[beebub]

Presumably there are also Wall street funds who bet long and are more than happy to nudge reddit in their favour too.

This.

I hear a lot in the US about hedge fund managers going to their politicians complaining about how 'hackers' have been trying to ruin them... Uh using public information and buying stocks legitimately, regardless of their motivations. Welcome to capitalism, boiz! #hurtswhenidontwin