Discussion Game Stop Stock Short Squeeze

[conehead433]

A very interesting thing is happening in regard to Game Stop's stock (GME). Apparently some hedge funds decided to short the stock believing that with malls closing and the pandemic raging that the company would be going out of business soon. Not so fast my friend, as a number of investors have been buying up GME shares sending the stock soaring to as high as $380 today. The hedge funds have to start covering their positions after Friday and are doing everything they possibly can to drive the prices lower including spamming message boards about other stocks as well as getting brokerage companies to slow trading by having technical issues. The hedge funds apparently began shorting the stock when it was around $10 a share. To be able to short a stock an investor has to borrow shares to sell and then buys them back at what would hopefully be a lower price. Having to buy back shares at ~$400 that you paid $10 for will probably bankrupt the hedge funds involved. Part of the problem for the hedge funds is that the brokerage firms have allowed them to short the stock without actually borrowing the shares, commonly called a naked short. This supposedly is not allowed, and should actually be illegal. Because of this the number of shorted shares exceeds the number of shares in existence. The investors are holding strong and adding to their positions as it is apparent that the stock is going even higher as the shorts are forced to cover. I am not recommending getting involved, but congrats to the savvy investors who make a ton of money on this while screwing the hedge funds.

GameStop Corporation (GME) Stock Price, News, Quote & History - Yahoo Finance

Find the latest GameStop Corporation (GME) stock quote, history, news and other vital information to help you with your stock trading and investing.

finance.yahoo.com

 

[zinfamous]

yes, we know

 

[Jaskalas]

I wonder if Gamestop can cash out on and benefit from any of this?

 

[ivwshane]

Thanks for the explanation. How do we know that they have to cover their bets after Friday?

How does this end for those who are helping to make the stock go higher? Do they also have a “get out by this date” timeframe as well?

 

[MomentsofSanity]

We blocked all shorting and restricted any uncovered option positions until further notice on GameStop and flipped it to non-marginable due to this nonsense.

 

[ivwshane]

I wonder if Gamestop can cash out on and benefit from any of this?

Wouldn’t cashing out essentially mean selling their own shares which would then give control to whoever has the most shares? Wouldn’t that essentially kill the company anyway?

 

[conehead433]

Thanks for the explanation. How do we know that they have to cover their bets after Friday?

How does this end for those who are helping to make the stock go higher? Do they also have a “get out by this date” timeframe as well?

When you purchase a stock you can keep it until you sell it. When you short a stock you have a certain amount of time before you are required to cover or buy back the shares you shorted. So how do investors make out. If they hold their positions the stock can only go higher when the shorts start covering. If the shorts don't have shares to buy they are in deep shit because the stock price will be even higher.

 

[Paratus]

As I posted elsewhere, I didn’t have Reddit bankrupting vulture capitalism on my 2021 bingo card but I’ll take it.

 

[fskimospy]

On one hand this is pretty obvious market manipulation for a stock that no one actually believes has anything remotely close to this value. Since stock markets are supposed to allocate capital, this sounds like the sort of thing that needs to be regulated.

On the other hand, hedge funds and other concentrated capital have been pulling this shit for years and screwing regular people over so fuck them too.

My hope is that this is something akin to a black panthers/gun control situation. Once hedge funds realize regular people can turn their own weapons against them maybe they will be more interested in regulating them.

 

[[DHT]Osiris]

On one hand this is pretty obvious market manipulation for a stock that no one actually believes has anything remotely close to this value. Since stock markets are supposed to allocate capital, this sounds like the sort of thing that needs to be regulated.

On the other hand, hedge funds and other concentrated capital have been pulling this shit for years and screwing regular people over so fuck them too.

My hope is that this is something akin to a black panthers/gun control situation. Once hedge funds realize regular people can turn their own weapons against them maybe they will be more interested in regulating them.

The decisions of regulation needs to not be left in the hands of those exploiting the lack of regulation. They need to get slapped by the long dick of the SEC.

 

[Franz316]

This is so beautiful to watch! Fuck the hedge funds that routinely manipulate the market and use their positions to make overly risky bets. They don't like it when you play by their own rules. All the Reddit people did was take advantage of a horrible choice... tough luck billionaires. Unfortunately they also have enough sway to shutdown trading but I think the point was made.

 

[hal2kilo]

A very interesting thing is happening in regard to Game Stop's stock (GME). Apparently some hedge funds decided to short the stock believing that with malls closing and the pandemic raging that the company would be going out of business soon. Not so fast my friend, as a number of investors have been buying up GME shares sending the stock soaring to as high as $380 today. The hedge funds have to start covering their positions after Friday and are doing everything they possibly can to drive the prices lower including spamming message boards about other stocks as well as getting brokerage companies to slow trading by having technical issues. The hedge funds apparently began shorting the stock when it was around $10 a share. To be able to short a stock an investor has to borrow shares to sell and then buys them back at what would hopefully be a lower price. Having to buy back shares at ~$400 that you paid $10 for will probably bankrupt the hedge funds involved. Part of the problem for the hedge funds is that the brokerage firms have allowed them to short the stock without actually borrowing the shares, commonly called a naked short. This supposedly is not allowed, and should actually be illegal. Because of this the number of shorted shares exceeds the number of shares in existence. The investors are holding strong and adding to their positions as it is apparent that the stock is going even higher as the shorts are forced to cover. I am not recommending getting involved, but congrats to the savvy investors who make a ton of money on this while screwing the hedge funds.

GameStop Corporation (GME) Stock Price, News, Quote & History - Yahoo Finance

Find the latest GameStop Corporation (GME) stock quote, history, news and other vital information to help you with your stock trading and investing.

finance.yahoo.com

These " investors" are like people who never drink and go out on New Years.

 

[iRONic]

Wouldn’t cashing out essentially mean selling their own shares which would then give control to whoever has the most shares? Wouldn’t that essentially kill the company anyway?

This guy might be trying a power grab;

Chewy CEO Ryan Cohen has been pushing GameStop to investors for months. He owns at least 13% of the company’s stock and is now on its board, which many took to mean it would move in a more digital direction.

 

[GoodRevrnd]

On one hand this is pretty obvious market manipulation for a stock that no one actually believes has anything remotely close to this value. Since stock markets are supposed to allocate capital, this sounds like the sort of thing that needs to be regulated.

On the other hand, hedge funds and other concentrated capital have been pulling this shit for years and screwing regular people over so fuck them too.

My hope is that this is something akin to a black panthers/gun control situation. Once hedge funds realize regular people can turn their own weapons against them maybe they will be more interested in regulating them.

https://twitter.com/x/status/1354460381297700870

Watch the video segment too imo for some highlights from the institutionals calling for regulation.

 

[dainthomas]

Supposedly the SEC is now looking at r/wallstreetbets. It'll be messed up if they get it shut down or take some other action, while letting these hedge fund assholes get away with naked shorts.

 

[hal2kilo]

Supposedly the SEC is now looking at r/wallstreetbets. It'll be messed up if they get it shut down or take some other action, while letting these hedge fund assholes get away with naked shorts.

Saw a chyron on CNBC that says the servers shut down.

 

[senseamp]

It's a crazy situation, those WSB guys are morons valuing the next Blockbuster at $25B, but canceling WSB is only going to breed resentment with Big Tech and Wall Street appearing in cahoots and screwing the little guy.

 

[senseamp]

The wallstreetbets reddit is back online, but discord is gone.

 

[hal2kilo]

The wallstreetbets reddit is back online, but discord is gone.

Missed that.

 

[zzyzxroad]

It's a crazy situation, those WSB guys are morons valuing the next Blockbuster at $25B, but canceling WSB is only going to breed resentment with Big Tech and Wall Street appearing in cahoots and screwing the little guy.

Am I misunderstanding what they did.? They screwed over the hedge funds forcing them to buy in and further accelerate the stock no? They didn't think GameStop was a good investment but rather took advantage of the se missive funds profiting off of a dying business? Evidently their plan worked as intended? and they made a ton of money off the funds?

 

[senseamp]

Am I misunderstanding what they did.? They screwed over the hedge funds forcing them to buy in and further accelerate the stock no? They didn't think GameStop was a good investment but rather took advantage of the se missive funds profiting off of a dying business? Evidently their plan worked as intended? and they made a ton of money off the funds?

Yeah, the hedge funds overbeat a dead horse. They shorted more shares than there were actually traded. WSB caught on that if they started buying all together and refused to sell (they call it "diamond hands"), they could drive the stock up enough to cause forced buying from a short squeeze, where shorts eat into their margin, and are forced to buy stock to cover the short position at whatever price it is, and since there wasn't enough stock to cover all the short positions, if this happened, supply/demand could drive the stock to the stratosphere. Note, there is almost no dependency here on how well the company is doing. This is just exploiting the situation created by the shorts' greed and stupidity. Of course, at some point, these WSB guys will need to actually sell positions to cash in, so the ones that unload fast enough will make bank, but many others will lose their shirts, since this company is basically worthless compared to current valuation once the technical situation resolves.

 

[zzyzxroad]

Yeah, the hedge funds overbeat a dead horse. They shorted more shares than there were actually traded. WSB caught on that if they started buying all together and refused to sell (they call it "diamond hands"), they could drive the stock up enough to cause forced buying from a short squeeze, where shorts eat into their margin, and are forced to buy stock to cover the short position at whatever price it is, and since there wasn't enough stock to cover all the short positions, if this happened, supply/demand could drive the stock to the stratosphere. Note, there is almost no dependency here on how well the company is doing. This is just exploiting the situation created by the shorts' greed and stupidity. Of course, at some point, these WSB guys will need to actually sell positions to cash in, so the ones that unload fast enough will make bank, but many others will lose their shirts, since this company is basically worthless compared to current valuation once the technical situation resolves.

Got it, thanks. I thought the funds were forced into a panic buy at which time the WSB folks would dump and profit. If they lose a a ton of money they are idiots but cant say I hate seeing these big hedge funds taking it on the nose.

 

[senseamp]

Got it, thanks. I thought the funds were forced into a panic buy at which time the WSB folks would dump and profit. If they lose a a ton of money they are idiots but cant say I hate seeing these big hedge funds taking it on the nose.

Yeah, the smart ones bought long ago for single digits and are selling into the hedge funds forced buying. The future bag-holders are coming in and buying now hoping the squeeze will push it even higher and they can get out before it tanks. I am just watching from the sidelines enjoying the entertainment. Although I did offload some stocks that went up a lot today for no reason because people think that's where WSB will go next. If someone wants to offer me several years of returns on one day, I am not going to turn it down.

 

[Dulanic]

It's a crazy situation, those WSB guys are morons valuing the next Blockbuster at $25B, but canceling WSB is only going to breed resentment with Big Tech and Wall Street appearing in cahoots and screwing the little guy.

Ironically that bankrupt company is up lol....the 3month average vol is less than 3 shares.... today? 19M.

BLIAQ.PK - | Stock Price & Latest News | Reuters

www.reuters.com

 

[Jhhnn]

Yeah, the smart ones bought long ago for single digits and are selling into the hedge funds forced buying. The future bag-holders are coming in and buying now hoping the squeeze will push it even higher and they can get out before it tanks. I am just watching from the sidelines enjoying the entertainment. Although I did offload some stocks that went up a lot today for no reason because people think that's where WSB will go next. If someone wants to offer me several years of returns on one day, I am not going to turn it down.

Yeh, but even the people who buy now will only be out what they put in. Short sellers caught in the squeeze will take enormous & obviously unanticipated losses. Short selling at $10 in anticipation of making a few dollars per share turned into a nightmare of having to buy at $400 per share. Warren Buffet was right when he said that derivatives are instruments of mass financial destruction. Naked shorting is the simplest of them.