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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 By the time you read this, that number may be horribly outdated, as the stock continues to bounce up and down with extreme volatility hour by hour (it dipped down as low as $61 and peaked as high as $159 on Friday).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: 2) by Thexalon on Friday January 29 2021, @09:00PM (1 child)

    by Thexalon (636) on Friday January 29 2021, @09:00PM (#1106699)

    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:

    To what extent did large investors, such as hedge funds like Melvin Capital Management, and their short positions impact the fluctuation of GameStop’s share prices? Did any of these practices violate existing securities laws?

    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.

    --
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  • (Score: 2) by Socrastotle on Saturday January 30 2021, @03:52PM

    by Socrastotle (13446) on Saturday January 30 2021, @03:52PM (#1106892) Journal

    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:

    Please make your predictions of what you expect the Biden administration to do today, instead of creating some sort of ad-hoc mental gymnastic rationalization that the media will feed you after the fact.

    The corporate media and Wallstreet are both turning to the Biden administration, who they donated a fuck ton to, to save them from the peasants. What do you think will happen?

    And similarly all of this is being sourced from WallStreetBets [reddit.com], a subreddit. Right now Reddit leadership is overtly in support of this. What do you think will be this little subreddit's ultimate fate?

    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.