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Wow, this is wild. Let me see if I can summarize from my quick read of the links people have posted (just a summary, not claiming those links are correct). The
by bo1024 6y ago
Wow, this is wild. Let me see if I can summarize from my quick read of the links people have posted (just a summary, not claiming those links are correct).
The catalyst event happening is apparently an impending "short squeeze" for GameStop (GME) stock. The underlying issue is being painted as a power struggle between individuals ("retail investors") and hedge funds / institutional investors.
The idea of the short squeeze is that institutional investors short-sold GME, meaning they took money in exchange for a promise to deliver shares later. This seemed safe because they thought it would be easy to buy cheap shares later and deliver as they are supposed to.
However, the share price started going up. People know the holders of shorts will need to buy back shares, so people (wallstreetsbets people?) buy the shares first. This drives up the price even more, increasing the potential desperation of the shorts-holders, and this cycle can theoretically get really vicious really fast, leading to a "squeeze". So retail investors are hoping to make a bunch of money off the institutional investors holding the shorts. In theory, if everyone bought Gamestop shares and refused to sell, the holders of shorts would be failing to fulfill their contract and be in huge trouble (but they will pay big prices first).
This leads to the David-and-Goliath story. The claim is that institutional investors are actively trying to paint reddit as market manipulators, in an attempt (either short or long term) to get regulators to shut down individual investing and tilt the field more to institutions. This narrative is aided by WSB trends to invest as a block in "meme stocks".
On the other hand, redditors are painting the institutions as serial entrenched market manipulators who got caught with their pants down in this instance, and who are trying dirty tricks to get out of a sticky situation.
Did I get it right?
- dentemple 6y agoFor sure, Friday will be an interesting trading day for $GME.
- karakot 6y agothat was an understatement lol (in hindsight)
- throw14082020 6y agoLooks like instutional investors goals are 2 fold: - Asap: Get public (media coverage) to sell GME to lower price and reduce squeeze. - Long term: Discredit and diminish WSB. I think some serious unintended consequences will occur today.
- oarabbus_ 6y agoThe short sellers are getting absolutely roasted right now. I think they really misunderestimated the willingness of the WSB hivemind to blindly keep purchasing shares. This entire week, every time there's been an institutional move causing a significant intraday drop, it just gets pushed back up relentlessly. Incredible stuff to watch.
- voisin 6y agoThere’s a tiny bit more - the institutional guys let their exposure get out of hand by shorting more than the stock’s float (I think something like 140%!), so there was never going to be a way to cover the short interest without moving the market against themselves. And beyond a short squeeze, there are some positive fundamentals in place that the WSB guys pointed out repeatedly. I think this is a crowded short trade and the institutional guys are not as smart as they think they are. When they lose, they get pouty and start complaining to regulators.
- hncommenter13 6y agoJust FYI, people often forget that shorting shares creates synthetic shares that, conceptually, should to be added to the float. Imagine a company with 1 share outstanding. I borrow a share from Person A, and I sell it to Person B. Person A and Person B now both own 1 share, and I own -1 shares. The total shares outstanding is still 1 share (2 + -1), but the float has increased. The short interest, as commonly reported, will be -100%. But it's actually only 50% of the shares that could trade. The effective float has increased by the size of the short interest.