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posted by martyb on Thursday January 28 2021, @04:57AM   Printer-friendly
from the ups-and-downs dept.

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 By the time you read this, that number may be horribly outdated, as the stock continues to bounce up and down with extreme volatility hour by hour (it dipped down as low as $61 and peaked as high as $159 on Friday).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)


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  • (Score: 0) by Anonymous Coward on Friday January 29 2021, @12:18AM (4 children)

    by Anonymous Coward on Friday January 29 2021, @12:18AM (#1106366)

    So much of this sounds like it's probably illegal. Pumping and dumping is illegal. It gets done though. I'm in the discord chat stock trading channels and I get spam of people always inviting me to pump and dump channels which sound illegal. I don't join them (I've joined a couple just to see what it's about and clicked through before leaving. They basically buy a stock, go around and hype it up everywhere, and sell. Again, this sounds illegal).

  • (Score: 0) by Anonymous Coward on Friday January 29 2021, @12:23AM

    by Anonymous Coward on Friday January 29 2021, @12:23AM (#1106369)

    Pump and Dump - Wikipedia

    ""Pump and dump" (P&D) is a form of securities fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price. Once the operators of the scheme "dump" (sell) their overvalued shares, the price falls and investors lose their money. This is most common with small cap cryptocurrencies[1] and very small corporations, i.e. "microcaps".[2]

    While fraudsters in the past relied on cold calls, the Internet now offers a cheaper and easier way of reaching large numbers of potential investors through spam email, bad data, social media, and false information.[2]"

    https://en.wikipedia.org/wiki/Pump_and_dump [wikipedia.org]

    Notice the word 'fraud'. Sounds illegal.

  • (Score: 2) by Socrastotle on Friday January 29 2021, @04:29AM (2 children)

    by Socrastotle (13446) on Friday January 29 2021, @04:29AM (#1106471) Journal

    Pump and dump is illegal because it's based on fraud. The reason people got excited and pumped up this stock is because it was dramatically over-shorted. The big money guys now need to be about 120% of total floated shares, and they're on a time-line. That is accurate and true information, which makes pumping a stock based on it 100% legal.

    Squeezing the shorts is a strategy as old as shorting itself. The only thing that happened here that was unique is that it was done in a decentralized way with massive numbers of people investing relatively small amounts.

    • (Score: 0) by Anonymous Coward on Friday January 29 2021, @07:06AM (1 child)

      by Anonymous Coward on Friday January 29 2021, @07:06AM (#1106507)

      I still question the legality of this. It's probably in one of those gray areas but I always see people trying to create these pump groups all over and it makes me wonder. I tend to ignore the spamming, I don't participate in any of it, but I get spammed all the time in the discord channels.

      • (Score: 0) by Anonymous Coward on Saturday January 30 2021, @08:57AM

        by Anonymous Coward on Saturday January 30 2021, @08:57AM (#1106843)

        The problem with a disorganized group is you can't assign one motivation to them all. P&Ds are illegal and I'm sure, given the large number of investors, more than a few people involved are fully in the P&D camp. They are screaming for everyone to hold while repeatedly closing and opening positions, they'd have to be with the volume of transactions involved. Providing them cover are the large numbers there to screw with the S&D attempt or various other motivations. The issue here is spotting them, as there is such a large number of people involved, but I'm sure the regulators and lawyers for various funds are going to be looking at the transactions here to spot the usual P&D pattern.