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Fuck. This is not good in either situation. If it's market manipulation, then shorters will be out in force. If not, then an org the size of GE will be a cataly

Fuck. This is not good in either situation. If it's market manipulation, then shorters will be out in force. If not, then an org the size of GE will be a catalyst.

tru3_power 7y ago
Can you explain why more shorters means share prices drop? Is it all perception or am I missing something? Sorry n00b here.
- onlyrealcuzzo 7y ago
  Share prices usually drop if there's a ton of short demand, because to short a stock -- you literally borrow a stock and then sell it. The idea is, you'll buy it back later (hopefully at a lower price) and return it to who you borrowed it from (hopefully for a profit).
  - Areading314 7y ago
    It doesn't matter who is shorting etc It matters if people are looking to sell the stock. Existing owners can also plummet a stock by selling even if there are no shorts.
    - vageli 7y ago
      Shorters _are_ people looking to sell the stock at the current asking price with the hope that they can buy the underlying equity at a discount in the future. Your statements are literally at odds with one another.
      - Areading314 7y ago
        no they're not. I said that existing holders and shorts can both cause a dip. It doesn't matter if its shorts or longs doing the selling.
        vageli 7y ago
        I took > It doesn't matter who is shorting etc to mean that short activity had no consequence.
  - wyxuan 7y ago
    You have the definition of shorting right, but it doesn't mean that shorts cause a stock to drop. Beyond meat has had a crazy amount of people shorting it, but that hasn't stopped it's 800% rise
    - arcticbull 7y ago
      Short selling does directly cause the stock price to move down due to increased selling pressure. What you're seeing with BYND is not directly because of the act of short-selling, but the knock-on consequences and market dynamics. In part that has to do with the fact that BYND has very few of the total shares floated, all available shares were shorted (around 50% of float), and what little organic retail demand for their shares existed was enough to move the price materially. Eventually the market cap crossed the threshold for inclusion in the Russel 2000 index, forcing ETFs tracking the Russel to buy BYND shares too. This all caused the short-sellers to get liquidated, forcing them to buy at whatever price was available. This in turn liquidated more shorts. And so on. That was a textbook short squeeze. IMO the reason it didn't go all the way up to the moon is that brokerages were charging 140% APR to short the shares, so we were seeing consistent turnover in the short positions. The answer to "Who would buy BYND shares for $250" is "the trader and/or index fund who has no choice." It's worth more than 25% of the companies in the S&P 500, but only has $87M in revenues and 200 employees in a warehouse in LA with a handful of pea patties.
- wyxuan 7y ago
  Share prices don't drop because of shorts. Tesla had a ton of people shorting them but it still didn't drop immediately in the short term. So does beyond meat. That doesn't change how beyond still surged 800% post ipo
- arcticbull 7y ago
  Short-selling does cause the price of a stock to drop because the process of a short-sale is this: (1) You borrow shares from your broker, and agree to return the same number of shares at some point in the future without regard for what they'll be worth then. (2) You then immediately sell those shares on the market. Increased selling does cause downward pressure on shares as a result, in the same way that increased buying pressure pushes shares up. (3) Eventually, you re-purchase shares for what is ideally a lower price and return them to the brokerage. Your profit (or loss) is the difference in price between when you short-sold and when you re-purchased, minus the fees your brokerage charged you to borrow the shares. Where it gets a little messy is if the stock price goes up, you run out of margin, and your brokerage forces you to purchase shares to cover your position. Then you're buying them at whatever price you can get them. This in turn moves the stock further up -- far enough, and it may cause other short-sellers to get liquidated too, and so on. The stock may go parabolic like BYND and TLRY. This is called a short squeeze.
  - deleted 7y ago
    [deleted]

Fuck. This is not good in either situation. If it's market manipulation, then shorters will be out in force. If not, then an org the size of GE will be a catalyst.

tru3_power 7y ago

Can you explain why more shorters means share prices drop? Is it all perception or am I missing something? Sorry n00b here.

onlyrealcuzzo 7y ago
Share prices usually drop if there's a ton of short demand, because to short a stock -- you literally borrow a stock and then sell it. The idea is, you'll buy it back later (hopefully at a lower price) and return it to who you borrowed it from (hopefully for a profit).
- Areading314 7y ago
  It doesn't matter who is shorting etc It matters if people are looking to sell the stock. Existing owners can also plummet a stock by selling even if there are no shorts.
  - vageli 7y ago
    Shorters _are_ people looking to sell the stock at the current asking price with the hope that they can buy the underlying equity at a discount in the future. Your statements are literally at odds with one another.
    - Areading314 7y ago
      no they're not. I said that existing holders and shorts can both cause a dip. It doesn't matter if its shorts or longs doing the selling.
      - vageli 7y ago
        I took > It doesn't matter who is shorting etc to mean that short activity had no consequence.
- wyxuan 7y ago
  You have the definition of shorting right, but it doesn't mean that shorts cause a stock to drop. Beyond meat has had a crazy amount of people shorting it, but that hasn't stopped it's 800% rise
  - arcticbull 7y ago
    Short selling does directly cause the stock price to move down due to increased selling pressure. What you're seeing with BYND is not directly because of the act of short-selling, but the knock-on consequences and market dynamics. In part that has to do with the fact that BYND has very few of the total shares floated, all available shares were shorted (around 50% of float), and what little organic retail demand for their shares existed was enough to move the price materially. Eventually the market cap crossed the threshold for inclusion in the Russel 2000 index, forcing ETFs tracking the Russel to buy BYND shares too. This all caused the short-sellers to get liquidated, forcing them to buy at whatever price was available. This in turn liquidated more shorts. And so on. That was a textbook short squeeze. IMO the reason it didn't go all the way up to the moon is that brokerages were charging 140% APR to short the shares, so we were seeing consistent turnover in the short positions. The answer to "Who would buy BYND shares for $250" is "the trader and/or index fund who has no choice." It's worth more than 25% of the companies in the S&P 500, but only has $87M in revenues and 200 employees in a warehouse in LA with a handful of pea patties.
wyxuan 7y ago
Share prices don't drop because of shorts. Tesla had a ton of people shorting them but it still didn't drop immediately in the short term. So does beyond meat. That doesn't change how beyond still surged 800% post ipo
arcticbull 7y ago
Short-selling does cause the price of a stock to drop because the process of a short-sale is this: (1) You borrow shares from your broker, and agree to return the same number of shares at some point in the future without regard for what they'll be worth then. (2) You then immediately sell those shares on the market. Increased selling does cause downward pressure on shares as a result, in the same way that increased buying pressure pushes shares up. (3) Eventually, you re-purchase shares for what is ideally a lower price and return them to the brokerage. Your profit (or loss) is the difference in price between when you short-sold and when you re-purchased, minus the fees your brokerage charged you to borrow the shares. Where it gets a little messy is if the stock price goes up, you run out of margin, and your brokerage forces you to purchase shares to cover your position. Then you're buying them at whatever price you can get them. This in turn moves the stock further up -- far enough, and it may cause other short-sellers to get liquidated too, and so on. The stock may go parabolic like BYND and TLRY. This is called a short squeeze.
- deleted 7y ago
  [deleted]