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The Complete Moron’s Guide to GameStop’s Stock Roller Coaster
The Complete Moron’s Guide to GameStop’s Stock Roller Coaster:
Last week, an epic short squeeze had driven GameStop stock up to $40 a share, a roughly 1,500 percent increase from its low point nine months ago. Little did anyone know at the time that this would only be the beginning of the story.
As I write this, GameStop's stock price is hovering around $350, up another 775 percent or so since I wrote about this situation eight days ago. By the time you read this, that number may be horribly outdated, as the stock continues to bounce up and down with extreme volatility hour by hour (it dipped down as low as $61 and peaked as high as $159 on Friday).
The current stock price now gives the company a market cap of about $26 billion.
On the surface, that means the market currently thinks GameStop is worth more than twice as much now (during a potentially existential threat to brick and mortar game sales) as it was during the height of the Wii boom in late 2007, when console game downloads were barely a thing.
Also at: Business Insider.
Melvin Capital, Hedge Fund Targeted by Reddit Board, Closes out of GameStop Short Position
Melvin Capital, hedge fund targeted by Reddit board, closes out of GameStop short position:
Melvin Capital closed out its short position in GameStop on Tuesday afternoon after taking a huge loss, the hedge fund's manager told CNBC's Andrew Ross Sorkin.
GameStop, hedge funds' most-hated stock, was targeted by an army of retail investors who marshaled forces against short sellers in online chat rooms. In the Reddit forum "wallstreetbets" with more than 2 million subscribers, rookie investors encouraged each other to pile into GameStop's shares and call options, creating massive short squeezes in the stock.
CNBC could not confirm the amount of losses Melvin Capital took on the short position. Citadel and Point72 have infused close to $3 billion into Gabe Plotkin's hedge fund to shore up its finances. On Wednesday's "Squawk Box," Sorkin said Plotkin told him that speculation about a bankruptcy filing is false.
GameStop shares have soared more than 400% this week alone to $347.51 apiece, driving its January gains to 685%. The stock was worth just $6 four months ago.
Reddit's WallStreetBets is locked as AMC, GameStop stocks fall after-hours
For the past week, Reddit's WallStreetBets community has been the center of an epic war between large Wall Street investors and small scale social media betters. Now, it's been locked, and spooked investors appear to be dumping their shares.
Shares of GameStop and AMC dropped dramatically in after-hours trading shortly after Reddit's community was made only viewable through an invite.
See also: Reddit traders cause Wall Street havoc by buying GameStop
GameStop and Elon Musk send Reddit and Robinhood to the top of the App Store charts
'Dumb Money' Is on GameStop, and It's Beating Wall Street at Its Own Game (archive)
(Score: 3, Interesting) by Thexalon on Thursday January 28 2021, @04:45PM (12 children)
The Biden administration didn't need to do anything about this: The exchanges stopped allowing trades on those stocks today. All completely legal, and showing to what degree the stock exchange is a fair game that everybody can play.
Oh, and the kinds of regulations the likes of Elizabeth Warren want would have prevented the situation arising in the first place, because they would make it illegal to short-sell 140% of a company's stock.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 2) by Socrastotle on Thursday January 28 2021, @06:22PM (7 children)
Naked shorting, which enables this, is already prevented by SEC regulations. The problem, as always, is that laws and regulations don't mean anything if they aren't enforced. And regulations against banks, wall street, etc are mostly meaningless because these groups and the politicians in DC are, essentially, the same people.
And no, stopping the trading of these stocks was almost certainly illegal. Buying stocks and telling people why you're buying them is legal. Companies colluding with investors (though again they are, in large part, frequently the same people anyhow) to prevent millions of people from trading, in order to prevent them from accessing the markets in order to make a profit (or less of a loss) has to be breaking about a million and one anti-compete and other laws and regulations. But of course this begs the question. Will the government actually enforce it? All we can see so far is that AOC is damn sure not controlled by the banks. But one congresswoman alone is hardly enough to enforce a pizza delivery, let alone bringing to heel the most influential organizations and people in this entire country.
(Score: 2) by Thexalon on Friday January 29 2021, @03:35AM (6 children)
I mentioned Senator Elizabeth Warren for a very specific reason, namely that her specialty has long been banking regulation. And her opinion on this whole mess was that there was a lack of enforcement of stock regulations at the SEC that led to the conditions that made the Redditors win this round.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 2) by Socrastotle on Friday January 29 2021, @04:49AM (5 children)
Redditors didn't "win this round" because of lack of regulations or whatever - they won because market fundamentals were on their side. The reason the market fundamentals were what they were could have prevented had the hedge fund obeyed regulations, but everything the Redditors did was 100% on the up and up.
But beyond that I don't understand what you're even proposing, and I'm not entirely sure you do either. Regulations already "have" to be followed. The reason they're not being followed is systemic. The DNC (and GOP) and Wallstreet/banks/megacorps are all deeply incestuous. And if you ever want one to act in a way disfavorable to the interests of another, you're going to need to completely detach the conflicts of interest. And that isn't happening in our country without a complete overhaul of our entire governmental system.
And hyper-partisanship means that will never peacefully happen, because people are so attached to their D or R that all somebody needs to say is "If you don't vote for, the other [evil] guy wins." and they'll immediately go back to voting for the D/R even if they hate them. Simply because they hate the other guy even more.
(Score: 2) by Thexalon on Friday January 29 2021, @02:59PM (3 children)
What I'm proposing is that we help the politicians that are actually in favor of fixing this situation, of which Warren is absolutely at the forefront, do what's needed to remove the scare quotes from the word "have" in your sentence. And yes, that means that a lot of the people who work at the SEC should be in serious trouble, like go-to-jail levels of trouble.
How do we get more politicians like her? By backing people who don't get their money from Wall Street. For any national election, you can find out exactly who qualifies by that standard over at OpenSecrets [opensecrets.org].
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 2) by Socrastotle on Friday January 29 2021, @05:49PM (2 children)
You might want to read this [twitter.com]. Yeah it's a Twatter link so I'll give the synopsis. Warren has taken a strong position on this issue. Want to guess which side? Oh yeah baby - Wallstreet all the way. In brief 'Dear SEC - filthy peasants have started eating with the royalty and they're not using proper etiquette. One used a salad fork for his Strottarga Bianco caviar!! I mean are you going to just let people use salad forks to eat Strottarga Bianco!? Are you going to just let us become mindless raving barbarians!? Yeah I didn't think so. Tell me how you're going to stop it, NOW.'
Judge politicians by their actual actions, not their rhetoric or their committees or whatever. Because all politicians are not only liars but the best liars this country has to offer. This issue is just glorious because there's enough money at play that it's going to drive people to take off the masks. So far we can say for sure that exactly one congressman isn't corrupt: AOC. Ted Cruz is ostensibly right behind her as well, but since he's 100% running for prezzy in 2024 it's *very* possible he's just playing the [not especially] long game.
(Score: 2) by Thexalon on Friday January 29 2021, @09:00PM (1 child)
Reading the Warren's letter to the SEC [senate.gov], I disagree with your characterization, particularly due to this line on page 4 where she's directing the head of the SEC to answer some questions:
That's specifically asking about the 140% short position the hedge funds had and asking if they were illegal, and if so why nothing was done about it.
Oh, and the concern about it being a pump-and-dump? She's right to be asking the question: Explaining exactly what's different about these Reddit posts and the stock email spam pump-and-dump game that's been around for decades isn't going to be easy. While of course this whole thing was gloriously bad for the hedge funds who went short, it was very good for somebody who bought GME long at $5 per share last year and is looking to unload it for a profit, and that somebody could very easily pop onto Reddit, convince a bunch of people to do what they did for the lulz, and make (last I looked) approximately 6000% return.
And most of the rest of the last page is specifically about how the SEC can use investigation from this incident to prevent market manipulation, which is one of those things that's illegal but vaguely defined and not well enforced.
That letter is right along with her rhetoric both as a senator and her academic work about how Wall Street should be working, versus how it actually works: She wants a securities market where the value of what's being traded has something to do with the fundamentals of the company (earnings per share and anticipated revenue from future product offerings), rather than just a flat-out casino. This incident demonstrated that it's far more like a high-end legal casino than anyone on Wall Street would care to admit.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 2) by Socrastotle on Saturday January 30 2021, @03:52PM
There was a reason I wrote this [soylentnews.org] post before this happened. It's like somehow I could predict the future... Quoting that brief post:
This was not a pump and dump by any stretch of the imagination. When shorts short, they eventually need to rebuy to cover the short. In the mean time they pay interest on it and have their money locked up. One guy, DeepFuckingValue on Reddit, noticed the shorts got crazy greedy on GameStop and had shorted more than 140% of its entire floated stock and informed everybody about this. And that's all there was to it. Now Wallstreet is trying to do everything, including illegal actions and calling in every corrupt favor, to avoid taking what would be at the minimum tens of billions of dollars in losses.
And you're engaging in "ad-hoc mental gymnastic rationalization" to try to avoid see what's in front of your own eyes. The only reason Warren now wants the SEC to "investigate" is to try to find a way to save Wallstreet. She's corrupt. They're all corrupt.
(Score: 2) by FatPhil on Saturday January 30 2021, @05:02PM
Don't use the word "fundamentals", it means something specific, and not how you're using it. The funadamentals for $GME are *terrible*, and on the shorters' side, not on the AOR's.
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 2) by ElizabethGreene on Friday January 29 2021, @03:17AM (3 children)
There is an important clarification on this.
The stock exchange halted trading of Gamestop due to volatility. These "circuit breaker" rules have been in place for decades and they are a very good thing.
Separate from that, several brokerages * blocked opening new positions in Gamestop. That feels wrong, and they will have to make strong arguments defending that decision in the inevitable slew of upcoming class action lawsuits.
* e.g. TD Ameritrade AKA Think or Swim/RobinHood/TastyTrade are what I heard about.
(Score: 2) by Thexalon on Friday January 29 2021, @03:32AM
As someone pointed out, Robinhood, which was blocking trades on Gamestop, is part of the same conglomerate as one of the hedge funds that was being adversely affected by the rise in Gamestop's price. Which means that there's a clear manipulation claim.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 1, Redundant) by darkfeline on Friday January 29 2021, @10:39AM (1 child)
> The stock exchange halted trading of Gamestop
They did not halt trading of GME. They halted retail (individual) traders from buying GME. They did not halt retail traders from selling GME, nor did they halt institutional traders (The Man) from buying or selling GME.
There are a number of hypotheses why they did this, none of which are positive.
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(Score: 2) by ElizabethGreene on Friday January 29 2021, @03:47PM
With the utmost of respect, you are wrong. The NYSE stopped trading of $GME several times. You can see the full list here: https://www.nyse.com/trade-halt-historical [nyse.com] and filter it for the GME ticker.
Volatility based halts are a good thing. They prevent another 1987 black monday style crash, or at least slow it down enough for humans to take a breath.
That said, I don't have any good arguments for why e.g. RobinHood should have blocked trading. I firmly believe that was a mistake and it will cost them dearly.