Game Stop Stock, GME

[pmax]

Over $450 last Thursday. Pushing $90 as of a few minutes ago.

Someone please explain this to me.

https://www.msn.com/en-us/money/topstocks/gamestop-shares-plunge-below-dollar100-as-wallstreetbets-traders-face-huge-losses/ar-BB1dkewj

[KFC911]

^^^^ There was nothing "real" about last weeks price... just a typical bubble.

Bubbles pop ... that is all.

[red-beard]

Not a bubble. It was a pump and dump scheme. If you got in early and out early, you made a BUNCH of money. The whole thing was a ruse to get the minions to go along. "Lets take down this jerk-off Hedge fund". I expect some people had already bought in early. There was reporting that one person made about $30M off the trading.

[jyl]

Retail accounts were net sellers all last week. Hedge funds covered or hedged their short positions. On expiry of January options, dealers sold shares that were no longer needed to hedge options that expired out of the money. Options that expired in the money were settled in cash as the retail traders didn’t have the capital required to take settlement in shares. The later-arriving or stupider r/wsb retail traders got left holding the bag, like the coyote running in midair. I doubt most of them were hedged. Stock down something like -70-80% in 2 days, many of the February options down -70-90%, plus the Jan options that expired worthless. I haven’t seen estimates of the losses since Friday, but it’ll be funny/interesting to find out.

[jyl]

I feel pretty confident that I can stop paying attention to r/wsb and get back to actual productive work.

I think r/wsb is done, as a major destabilizing force that could actually hope to break things. Too many voices, including shills, trolls, idiots, celebrity idiots, and hedge funds in disguise, pulling the crowd in too many directions. I think it will always drive short bursts of crazy action in some tiny stocks and maybe blips in larger assets, and reinforce market and stock trends. Retail trading volume is going to stay big, for now, and right now generally is supportive of the market.

My test basically is: will I *have to* pay close attention to X, to hope to succeed at what I’m doing? R/wsb is entertaining but by that test, will soon be unimportant.

[KFC911]

You're right James.... not a bubble. Your description is more accurate... but not really a pump & dump either (as most probably didn't sell). A social media fueled frenzy mebbe?

Whatever ya call it tho... it wasn't rational and corrected itself just as quickly.

[KFC911]

Thanks John!

[drcoastline]

Any of you guys ever see this video from an interview with Jim Cramer from 2006? Was turned onto this interview a few years ago. Not really what occurred last week (I don't think) but don't for a second think the market is organic. You will hear him speak of RIM research in motion which is blackberry. This was when Apple was just getting a foot hold in the phone market.

[pmax]

Originally Posted by red-beard

Not a bubble. It was a pump and dump scheme. If you got in early and out early, you made a BUNCH of money. The whole thing was a ruse to get the minions to go along. "Lets take down this jerk-off Hedge fund". I expect some people had already bought in early. There was reporting that one person made about $30M off the trading.

Buy low, sell high.

[jyl]

The guy who was probably the biggest ringleader is a financial advisor from Boston (?) who used two aliases on r/wsb, “RoaringKitty” and “Deep****ingValue”, to pump the stock and turn what started as a standard short squeeze trade into a rage against the oppressor thing, take down Wall Street, kill the suits, etc. He supposedly posted his daily account screenshots showing how much money he made, proving that he wasn’t selling and has kept buying, convincing others to hold firm and buy more, etc. That is the guy who supposedly took a few thousand $ and got to near $40MM, now he is telling the crowd that even though he’s losing a lot (supposedly $13MM today) he’s holding firm and they should too because they’re going to drive the stock to $1,000.

https://www.cnbc.com/amp/2021/02/02/reddit-user-who-helped-inspire-gamestop-mania-says-he-lost-13-million-on-tuesday-but-is-still-holding-on.html

He’s not the only guy who identified GME as a buy last year, professional traders were pushing it too (including one well known hedge fund), and this year celebrities like Mark Cuban and Elon Musk jumped in and started pumping it too. However, if the SEC is looking for one guy to investigate, this guy is probably the one.

The interesting thing is whether he is actually holding firm and not selling like he claims, or if he’s actually scamming his millions of followers by posting fake or incomplete screenshots while actually dumping his positions. If he’s actually holding his GME stock and options to the death, seems like he’s going to lose most of his gains. If he’s lying and that gets out, it might make him a more interesting enforcement target - and you have to wonder about his personal safety.

Meanwhile, the data shows or strongly suggests that a bunch of hedge funds have made billions, big/huge institutions have made billions, dealers and market makers have made billions . . . yeah, redditors, good job of crushing Wall St there :-)

[greglepore]

Originally Posted by jyl

The guy who was probably the biggest ringleader is a financial advisor from Boston (?) who used two aliases on r/wsb, “RoaringKitty” and “Deep****ingValue”, to pump the stock and turn what started as a standard short squeeze trade into a rage against the oppressor thing, take down Wall Street, kill the suits, etc. He supposedly posted his daily account screenshots showing how much money he made, proving that he wasn’t selling and has kept buying, convincing others to hold firm and buy more, etc. That is the guy who supposedly took a few thousand $ and got to near $40MM, now he is telling the crowd that even though he’s losing a lot (supposedly $13MM today) he’s holding firm and they should too because they’re going to drive the stock to $1,000.

https://www.cnbc.com/amp/2021/02/02/reddit-user-who-helped-inspire-gamestop-mania-says-he-lost-13-million-on-tuesday-but-is-still-holding-on.html

He’s not the only guy who identified GME as a buy last year, professional traders were pushing it too (including one well known hedge fund), and this year celebrities like Mark Cuban and Elon Musk jumped in and started pumping it too. However, if the SEC is looking for one guy to investigate, this guy is probably the one.

The interesting thing is whether he is actually holding firm and not selling like he claims, or if he’s actually scamming his millions of followers by posting fake or incomplete screenshots while actually dumping his positions. If he’s actually holding his GME stock and options to the death, seems like he’s going to lose most of his gains. If he’s lying and that gets out, it might make him a more interesting enforcement target - and you have to wonder about his personal safety.

Meanwhile, the data shows or strongly suggests that a bunch of hedge funds have made billions, big/huge institutions have made billions, dealers and market makers have made billions . . . yeah, redditors, good job of crushing Wall St there :-)

So, John, how much money did the clearinghouses make on both sides of this ,and isn't that worth scrutiny as much as the pump and dump guy, who is currently figuring out how to put money into his commissary account?

[93nav]

He started saying GME was undervalued in 2019. So if he was pumping and dumping, it was the long game. Link to his Youtube account below. Also, I don't think he was a financial advisor. Worked for a insurance company in MA, possibly an analyst. At his high point, it have been $48m in stock, options, and cash.

I think it was a combination of things.

- The guy you referenced, people started listening to him
- Ryan Cohen of CHWY bought like 9% of the stock last summer, then more later for a total of 13% with costs from single digits to low teens. Total invested may have been close to $80M
- Late 2020 or whenever somebody figured out there were a lot of hedge funds shorting the stock, like 140% of the stock
- Jan of 2021 WSB's going bonkers saying they were going to squeeze the short sellers
- Andrew Left of Citron Research said he was going to release a video (or something) with reasons why GME was not worth even $20. This was on Jan 20, not sure if he ever released anything though
- Even more mania on WSB after Left's announcement
- Then things got wild and I have no idea who was doing what to whom.

Just my take on what went on. I am in the third camp "there are those who make things happen, those who watch what happened, and those who wonder what happened".

https://www.youtube.com/c/RoaringKitty/videos

https://www.msn.com/en-us/money/companies/gamestop-news-gme-stock-gets-goosed-30-by-chewy-co-founder-stake/ar-BB18yOOv

https://markets.businessinsider.com/news/stocks/gamestop-stock-short-sellers-melvin-capital-citron-surrender-bets-gme-2021-1-1030010382?op=1

Originally Posted by jyl

The guy who was probably the biggest ringleader is a financial advisor from Boston (?) who used two aliases on r/wsb, “RoaringKitty” and “Deep****ingValue”, to pump the stock and turn what started as a standard short squeeze trade into a rage against the oppressor thing, take down Wall Street, kill the suits, etc. He supposedly posted his daily account screenshots showing how much money he made, proving that he wasn’t selling and has kept buying, convincing others to hold firm and buy more, etc. That is the guy who supposedly took a few thousand $ and got to near $40MM, now he is telling the crowd that even though he’s losing a lot (supposedly $13MM today) he’s holding firm and they should too because they’re going to drive the stock to $1,000.

https://www.cnbc.com/amp/2021/02/02/reddit-user-who-helped-inspire-gamestop-mania-says-he-lost-13-million-on-tuesday-but-is-still-holding-on.html

He’s not the only guy who identified GME as a buy last year, professional traders were pushing it too (including one well known hedge fund), and this year celebrities like Mark Cuban and Elon Musk jumped in and started pumping it too. However, if the SEC is looking for one guy to investigate, this guy is probably the one.

The interesting thing is whether he is actually holding firm and not selling like he claims, or if he’s actually scamming his millions of followers by posting fake or incomplete screenshots while actually dumping his positions. If he’s actually holding his GME stock and options to the death, seems like he’s going to lose most of his gains. If he’s lying and that gets out, it might make him a more interesting enforcement target - and you have to wonder about his personal safety.

Meanwhile, the data shows or strongly suggests that a bunch of hedge funds have made billions, big/huge institutions have made billions, dealers and market makers have made billions . . . yeah, redditors, good job of crushing Wall St there :-)

[tdw28210]

"Pump and Dump" traditionally refers to small, sketchy broker-dealers, issuing glowing, overly-optimistic "research reports" on no-name micro-cap stocks and then trading those stocks between co-conspirator firms in order to create the illusion of genuine investor activity. And then sucking in as many new buyers as possible around this increased "activity" and then finally stepping away/dumping the stock after they've run out of new suckers to buy in at ever increasing prices. These firms typically made most of their money on all the related trading activity (fat commissions, punitive spreads, etc.) in the hyped stock. A stock that would otherwise be dormant and worthless. Fortunately, most of this activity has already been shut down in the US. (See Wolf of Wall Street)

This was the banding together of retail traders via a social media platform (Reddit) by a somewhat unknown leader(s) in an effort to execute on a somewhat half-assed simultaneous trading strategy. It was further fueled by a "screw the man/diamond hands" battle cry and a general hatred of hedge funds and "Wall Street". A hatred that seems to stem from watching their collective families finances crumble before their eyes during the 08/09 financial crisis. ( I know the feeling).

Unfortunately, they chose the worst possible platform to execute such a strategy upon. Their chosen platform was (is) an under-capitalized, data mining app masquerading as a trading app that makes its money by aggregating and selling its customers' orders to the very same "man" they were trying to beat. And it was that same "man" that bailed out their chosen platform when it needed cash to avoid a shut down. But "the man" wasn't being benevolent. He never is. He was merely protecting his previous investment and insuring his ongoing access to "dumb money" order flow and the data mining opportunities that come with it.

Rule 1 :If you are going to screw "the man", don't get in bed with "the man".

Let's not overlook the fact that despite the odds and their own self-induced hurdles, the little guys succeeded somewhat in their strategy. Melvin Capital (the hedge fund that was initially the focus of their collective ire) was reportedly down 53% in January. Despite this, I seriously doubt any of the managers or traders there are going hungry anytime soon. Nor are their qualified investors. They all may have to cut back on their luxuries a bit, but many won't. Unfortunately, most of these retail traders will likely lose most of their capital.

In the end, I doubt anyone goes to jail and the only ones who will make money from here are mostly the professional daytraders and other hedge funds that have already been working over the "dumb money" retail traders since last week. And the lawyers! The LAWYERS involved in the now 18 lawsuits against Robinhood. They will get paid.

We MAY see some action by the SEC around limits on open short interest and shorting in general. And likely new capital requirements from the back-office clearing houses. Boring stuff that mostly will be forgotten by Super Bowl Sunday. Oh and some blustering from Capitol Hill.

But this "flash mob"/vigilante trading phenomenon is probably here for awhile and short-sellers/HF's will have to adapt to/account for it. The funds that rely on technology to drive their trading strategies will rewrite their risk models and maybe assign a few interns to hang out on Reddit. (lol) And the Reddit crowd will likely get a mention in the financial press every time a stock goes parabolic. At least for a few months anyway.

As for Gamestop, it is still basically a pawn shop for gamers, located primarily in dying, 2nd-tier shopping malls. NOTHING about their business model (so far) has remotely justified their crazy stock price increase.

I sincerely hope we haven't alienated a whole generation of younger investors, but I suspect/fear that we may already have. Most have already witnessed two huge stock market drops (08/09 and 2020) and the fracturing forces they can introduce into RL (real life). And they now perceive that the rules were changed in the middle of the game, just when they thought they might actually get a little taste of Dom Perignon. A few have tasted the DP, but most won't have PBR money when it's all over.

[jyl]

Algorithms are already machine-reading r/wsb and similar chat places. Detect a surge of buy exhortations, front-run the retail trading. Professionals are surely already posting on r/wsb, cranking out posts to raise their karma points then jumping on stock chatter or pushing new memes, enthusiasm, screenshots. Coordinate shill posting with tactical buying to twitch the price and get the crowd going.

It’s probably no more likely to attract SEC enforcement than what’s gone on so far, and the posters will be in China, Russia, somewhere comfortably out of reach.

Retail daytraders of the stupid meme bro variety are going to be a big cow to be milked.

Probably there will need to be a mini GME fed to them every now and then, just like the slots need to pay off occasionally to keep the customers returning.

I don’t see any reason why they can’t be trained to short - they love to hate, so point them at a hateable company. A small bank, maybe.

The thing is, how much sympathy will there be for the victims or steps taken to protect them? Any effort to do so is the suits squashing the little guy, freedom, and free speech. When the victims think protecting them is a conspiracy . . .

[jyl]

Originally Posted by greglepore

So, John, how much money did the clearinghouses make on both sides of this ,and isn't that worth scrutiny as much as the pump and dump guy, who is currently figuring out how to put money into his commissary account?

DTCC revenue about $2BN annually in 2020 but net income only about $200MM. https://www.dtcc.com/-/media/Files/Downloads/legal/financials/2020/DTCC-Financial-Statements-Q3-2020.pdf

They are essentially owned (maybe not literally) by the big brokers and market makers, they are there to allow the system to function, not to be a big money maker.

Compare to Citadel Securities’ revenue $7BN in 2020 and they are only 25-30% market share in equity marketmaking.

[red-beard]

The guy who's stock was up to around $30-40M nd showing his losses now, if he shorted the stock at the top, he would be protected on the downside while showing his "losses" to the public.

[jyl]

Originally Posted by red-beard

The guy who's stock was up to around $30-40M nd showing his losses now, if he shorted the stock at the top, he would be protected on the downside while showing his "losses" to the public.

Maybe hedged in a different account.

Seriously, if it ever comes out that he was deceiving or betraying or misleading his r/wsb following - even if perfectly legal - he may want to consider going into hiding. In that size and type of mob, there are going to be some unhinged and dangerous people.

[speeder]

There were not any shorts available when GME was soaring a few days ago, so that scenario is fake.

[jyl]

Originally Posted by speeder

There were not any shorts available when GME was soaring a few days ago, so that scenario is fake.

No problem buying puts then

[jyl]

https://www.bloomberg.com/opinion/articles/2021-02-03/goldman-sachs-goes-to-supreme-court-hedge-funds-won-on-gamestop-kkpoe6ws?sref=eCUg41rA

Kind of funny opinion column about Gamestop (skip the Goldman stuff at the start). I liked it because the guy is musing about the hedge funds and marketmakers who profited from the GME mess, which is a different angle from the other 99% of articles about the retail traders and loser hedge funds.

Someday someone will write the history of this curious little episode and do the research on what really happened. Carson Block, the well-known short-seller who runs the Muddy Waters fund, says he thinks the squeeze was partly or largely due to hedge funds going after other hedge funds. He’s not a neutral party and I’m not sure how much digging he’s really done, but he’s been around a long time and knows that world really well.

I don’t have a link for the article where he was interviewed, but Block is interesting in that he’s not backing down or retreating into the shadows, he is continuing to aggressively investigate short-selling candidates, publish research, and openly short their stock. Good for him.

I admire many professional short-sellers. The good ones are dedicated to rooting out fraud and deceit, exposing companies where managements have lied and misled investors, and bringing those valuations back down to fair value. They go after financial market abuses for real, while most of the r/wsb crowd has no idea what they are doing other than parroting moronic meemes.

Of course there are the lazy shorts, the “dump and cover” sort. From what I’ve seen (I was always on the “other side”, as a long only smallcap fund) the lazy, baseless kind of short attacks seldom have lasting effect on a stock, give longs a chance to buy lower, and seldom have much effect on the company itself.

When you think about it, if a company’s stock goes down 50% for several months then recovers, why should that affect the company’s sales, profits, operations? Top management’s options may suffer temporarily, but they usually issue themselves more options at the new low strike. Their ability to acquire or resist acquisition may be affected, but that’s not always a bad thing. Capital-raising via equity is affected, which matters if the company is a cash-poor, low-credit-quality, money-loser, which may be why it is being shorted in the first place.

My stock screens always include short interest. High short interest helps get the stock on my “interesting, let’s study” list. High and declining short interest, plus depressed valuation and improving price momentum, are “ooo, really interesting”. The shorts create opportunities.

As for if r/wsb actually killed the hedge funds:

"Bloomberg discussed how after last week's outsized de-risking on the back of a retail driven squeeze in heavily shorted/popular message board stocks, hedge funds have been busy adding back exposure in both their long and short books. Noted that according to Goldman Sachs, gross trading flow increased on Tuesday at fastest pace since coronavirus bottom in March. Added that hedge funds are leaning more bullish than ever, with the industry's long-short ratio climbing to highest since Goldman began tracking the data in 2011. JPMorgan also discussed some healing in the space, noting that hedge funds are adding back gross exposure, it is seeing longs outperform the shorts, and long/short funds appear to have recovered a lot of the losses they suffered in January. Added that it seems likely that the industry is through most of the extreme deleveraging."