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Can someone explain how this is manipulation? Users on WSB saw the potential for a short squeeze and bought on it (it's a common trading strategy to play highly

Can someone explain how this is manipulation? Users on WSB saw the potential for a short squeeze and bought on it (it's a common trading strategy to play highly shorted stocks) and they told other users about the idea. Large investors like Ryan Cohen and Michael Burry were on this trade, too, for a long time.

hehehaha 6y ago
It’s not if you’re retail but there are signs to indicate that professional traders drummed up retail over on r/wsb without any disclosures.
- Miner49er 6y ago
  What signs?
- s1artibartfast 6y ago
  Even if that were true, would it constitute manipulation? What disclosures are required for stating opinion and publicly available information. I can find 1000 articles on google finance.
  - hehehaha 6y ago
    It’s a problem if let’s say a hedge fund buys a struggling stock such as AMC for example and decides to plaster the entire sub using hundreds if not thousands of manufactured accounts? It’s been happening for awhile over on r/wsb. It’s basically a political misinformation campaign for stocks. DL makes it very easy to create believable live accounts.
Miner49er 6y ago
Another thing, GME is just one of many stocks that appear to be squeezing right now. These other stocks that might be squeezing (like DDS, TR?, FIZZ, BBBY) are barely mentioned on WSB. What's causing all these stocks to be squeezing at the same time? I'm not even sure we should be saying GME was WSB's doing, although it is a fun story.
- jdhn 6y ago
  BBBY has been brought up in a few DD (due diligence) posts. If you go to WSB and search for BBBY you'll come acorss them. GME is obviously the focus of attention, and therefore the lions share of posts are about them.
- perl4ever 6y ago
  Pattern recognition? It's not hard to find a list of the most shorted stocks currently, and think that you can buy them "earlier" than GME. By Monday, several were already way up, although not as extreme. I think the real world meaning of this, is that people shorted stocks that were perhaps in temporary distress, but many if not all of them could be saved if they got a lot of cash, which they can do, if they suddenly can sell stock at an inflated price. The short theses could have been self-fulfilling, but now things are going the other way. It's not really a violation of objective facts if the market decides to give these companies more capital. Who's to say they shouldn't get it? Especially with all the money showered on IPOs lately? I used to think short selling was honorable, misunderstood, etc. but if it really is a self-fulfilling thing, maybe it isn't a social good, especially when the viability of a company is affected by the temporary situation with covid. Maybe GME and similar should get a year's lifeline, for the good of all their stakeholders, because a lot could and almost certainly will change.
  - Miner49er 6y ago
    They've had high short float for months though? It could've happened at any point, I guess I'm just wondering why now, and why all at once? I suppose you're probably right, it could just be people trying to replicate GME.
    - perl4ever 6y ago
      I don't know, but the idea that other heavily shorted stocks might skyrocket came to me personally right about the end of last Friday, based on reading about GME. It reminds me of when "everybody" (in a vague sense) suddenly took covid-19 seriously. There's a dynamic sort of like people are particles in an avalanche or something. I remember the week or so leading up to March 13th (iirc) as just having the pressure building and wondering when something would be done, and then there was the tipping point.
salawat 6y ago
I have issues with where the line is actually drawn for market manipulation. It sure looks like the way it's applied is "if you inconvenience institutional investors, you're a market manipulator". As I've not seen much in the way of mitigating institutional investment firms capacity to do the same in the other direction vs retail.
LatteLazy 6y ago
You're not meant to coordinate your trades with other entities. That alone is manipulation I believe. You're meant to buy(sell) because you like the idea of (not) owning something. That means you don't want to move the price. If you move the price you can't buy more at the same great price later. Wanting to move the price is sort of the smoking gun of manipulation. Being able to change the price in the short term means the price is "wrong". A wrong price cheats all sorts of market participants even ones who don't trade. Securities fraud is defined as any action that "induces investors to make purchase or sale decisions on the basis of false information"[0]. A false price is a great false piece of info to manufacture. I'm watching with interest for when WSB attracts the interest of the regulators. Being retail means they're generally ignored, until they're not. [0]: https://en.wikipedia.org/wiki/Securities_fraud https://en.wikipedia.org/wiki/Securities_fraud
- uxp100 6y ago
  Has the SEC ever considered the market value of a stock false information in this way before? Edit: and as to your first point, it has always been legal to say, hey, I am buying this stock, I like it, I recommend you buy it too. That alone is definitely not manipulation.
  - LatteLazy 6y ago
    Here's a case from 2019: https://www.sec.gov/news/press-release/2019-216 https://www.sec.gov/news/press-release/2019-216 Drove prices down, bought, drove prices up, sold. The reported actions of WSB is basically the second half of this with the twist that they think they can use large short positions as leverage to push prices up more. It's actually a very common, old form of fraud. The question is whether regulators care to enforce the rules. It's what Leonardo Decaprio is guilty of in Wolf of Wallstreet.
    - waheoo 6y ago
      Id say selling naked calls is the real fraud here. Why is it the fault of wsb for exploiting a market failure?

hehehaha 6y ago

It’s not if you’re retail but there are signs to indicate that professional traders drummed up retail over on r/wsb without any disclosures.

Miner49er 6y ago
What signs?
s1artibartfast 6y ago
Even if that were true, would it constitute manipulation? What disclosures are required for stating opinion and publicly available information. I can find 1000 articles on google finance.
- hehehaha 6y ago
  It’s a problem if let’s say a hedge fund buys a struggling stock such as AMC for example and decides to plaster the entire sub using hundreds if not thousands of manufactured accounts? It’s been happening for awhile over on r/wsb. It’s basically a political misinformation campaign for stocks. DL makes it very easy to create believable live accounts.

Miner49er 6y ago

Another thing, GME is just one of many stocks that appear to be squeezing right now. These other stocks that might be squeezing (like DDS, TR?, FIZZ, BBBY) are barely mentioned on WSB. What's causing all these stocks to be squeezing at the same time? I'm not even sure we should be saying GME was WSB's doing, although it is a fun story.

jdhn 6y ago
BBBY has been brought up in a few DD (due diligence) posts. If you go to WSB and search for BBBY you'll come acorss them. GME is obviously the focus of attention, and therefore the lions share of posts are about them.
perl4ever 6y ago
Pattern recognition? It's not hard to find a list of the most shorted stocks currently, and think that you can buy them "earlier" than GME. By Monday, several were already way up, although not as extreme. I think the real world meaning of this, is that people shorted stocks that were perhaps in temporary distress, but many if not all of them could be saved if they got a lot of cash, which they can do, if they suddenly can sell stock at an inflated price. The short theses could have been self-fulfilling, but now things are going the other way. It's not really a violation of objective facts if the market decides to give these companies more capital. Who's to say they shouldn't get it? Especially with all the money showered on IPOs lately? I used to think short selling was honorable, misunderstood, etc. but if it really is a self-fulfilling thing, maybe it isn't a social good, especially when the viability of a company is affected by the temporary situation with covid. Maybe GME and similar should get a year's lifeline, for the good of all their stakeholders, because a lot could and almost certainly will change.
- Miner49er 6y ago
  They've had high short float for months though? It could've happened at any point, I guess I'm just wondering why now, and why all at once? I suppose you're probably right, it could just be people trying to replicate GME.
  - perl4ever 6y ago
    I don't know, but the idea that other heavily shorted stocks might skyrocket came to me personally right about the end of last Friday, based on reading about GME. It reminds me of when "everybody" (in a vague sense) suddenly took covid-19 seriously. There's a dynamic sort of like people are particles in an avalanche or something. I remember the week or so leading up to March 13th (iirc) as just having the pressure building and wondering when something would be done, and then there was the tipping point.

salawat 6y ago

I have issues with where the line is actually drawn for market manipulation. It sure looks like the way it's applied is "if you inconvenience institutional investors, you're a market manipulator". As I've not seen much in the way of mitigating institutional investment firms capacity to do the same in the other direction vs retail.

LatteLazy 6y ago

You're not meant to coordinate your trades with other entities. That alone is manipulation I believe. You're meant to buy(sell) because you like the idea of (not) owning something. That means you don't want to move the price. If you move the price you can't buy more at the same great price later. Wanting to move the price is sort of the smoking gun of manipulation. Being able to change the price in the short term means the price is "wrong". A wrong price cheats all sorts of market participants even ones who don't trade. Securities fraud is defined as any action that "induces investors to make purchase or sale decisions on the basis of false information"[0]. A false price is a great false piece of info to manufacture. I'm watching with interest for when WSB attracts the interest of the regulators. Being retail means they're generally ignored, until they're not. [0]: https://en.wikipedia.org/wiki/Securities_fraud https://en.wikipedia.org/wiki/Securities_fraud

uxp100 6y ago
Has the SEC ever considered the market value of a stock false information in this way before? Edit: and as to your first point, it has always been legal to say, hey, I am buying this stock, I like it, I recommend you buy it too. That alone is definitely not manipulation.
- LatteLazy 6y ago
  Here's a case from 2019: https://www.sec.gov/news/press-release/2019-216 https://www.sec.gov/news/press-release/2019-216 Drove prices down, bought, drove prices up, sold. The reported actions of WSB is basically the second half of this with the twist that they think they can use large short positions as leverage to push prices up more. It's actually a very common, old form of fraud. The question is whether regulators care to enforce the rules. It's what Leonardo Decaprio is guilty of in Wolf of Wallstreet.
  - waheoo 6y ago
    Id say selling naked calls is the real fraud here. Why is it the fault of wsb for exploiting a market failure?