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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 By the time you read this, that number may be horribly outdated, as the stock continues to bounce up and down with extreme volatility hour by hour (it dipped down as low as $61 and peaked as high as $159 on Friday).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: 2) by quietus on Thursday January 28 2021, @08:11PM (3 children)
You forget another thing: margin call. A short seller needs to put up collateral with his brokerage, which itself has a maintenance margin on those [short] sales. Typical for a short sale is that the collateral needs to go up when the stock price rises. In practical terms, when the stock price has gone up with, say, 30%, the shorter got a call from his/her brokerage to increase the collateral. And another call at the next threshold. And another one at the next threshold, and so on. Shorters though have their own thresholds, and are non-emotional number people: they'll cap their losses, and ditch the short sale the moment that threshold has been called. They're not going to hang around to prove their point.
Besides, that a few shorters get burned is not the issue here: the real issue is that the share price has gone up to ludicrous levels; and somebody's going to cash in. All he/she needed was a little investment in bots, and a loophole in robinhood's registration process.
(Score: 2) by Socrastotle on Thursday January 28 2021, @08:36PM (2 children)
The one thing I think many people are missing here is that the shorts need to buy shares to close their positions. And not only do they need to buy, but they need to buy 140% of all floated shares. This is why Gamestop was targeted. The hedgies got greedy and *massively* over-shorted this stock. When they try to buy to cover, prices are going to go into lala land. Real losses are already in the billions of dollars. Losses when they try to close out their positions, and as a result jack the price up, are going to be *easily* in the tens of billions of dollars. This isn't a 'darn, cut my losses, time to go' type thing - we're talking about losses far larger than the net income Goldman Sachs, and perhaps surpassing even Alphabet/Google. This is real money, even in our world of fake money.
This is why they're already now turning to widespread collusion and what is likely illegal activity by getting brokerages to try to manipulate their users in order to manipulate the market and ideally drive the price down. They're in bed with the government and will be able to get off likely breaking the law/regulations with a limp slap on the wrist, if that. But bigger than that is the perception stuff. This stuff involves millions of people, all around the globe. And they're now overtly 'taking off the masks', colluding, and likely breaking the law - all to save Wallstreet vultures. And they're doing this in front of everybody. That's just unimaginably huge, and shows how critical this has become.
(Score: 1) by khallow on Friday January 29 2021, @12:34PM (1 child)
I don't think the private world has this kind of rapid coordination - there's no private organization that can deploy media and collude this fast. Look to the feds. They're the ones with the infrastructure already deployed for this sort of thing. They also have a lot of legal protection (such as sovereign immunity) against charges like collusion.
I see that the price of Gamestop dropped dramatically yesterday. That indicates to me that a good portion of the short is gone.
(Score: 0) by Anonymous Coward on Friday January 29 2021, @06:16PM
From what I understand when it was down the amount of shares being sold was small and possibly just back and forth between brokers to try to get retail investors to sell when a lot of them could only sell because many brokers blocked retail investors from buying.