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GameStop Opened at $300+ Today

95 points by spurgu 6y ago

xutopia 6y ago
I wish I groked all the dynamics at play. I don't fully understand it but it's a wild ride to see this happen. I heard AMC is going through a similar squeeze this week and I don't know how much I would dare to invest with my limited knowledge.
- jansan 6y ago
  > I wish I groked all the dynamics at play. In this case I would recommend to stay out of the game. Just enjoy the show.
  - DyslexicAtheist 6y ago
    why? it's not illegal. risky yes, but anyone can buy stocks.
    - jansan 6y ago
      Not illegal at all, but someone will pay at the end. There was something similar going on in the past with the Hunt brothers (look it up on Wikipedia). Everybody who followed them got burnt severely because the big guys suddenly had the rules changed.
    - spijdar 6y ago
      With absolutely zero domain knowledge and not really familiar with the situation, I've got a strong gut feeling that it's gonna be easy to get burned here. Hopefully I'm wrong, for all the people involved's stakes.
      - unforeseen9991 6y ago
        It's actually more dangerous if they don't get burned. Then they think they can get away with their gamble again, but they put even more money in next time.
      - Taylor_OD 6y ago
        Exactly. My friend made about 10K off of $200 in GameStop calls. He got the advice from his buddy who is a WSBs junkie. That buddy is also bankrupt and his only source of income is WSB. I cant image what his taxes will look like this year. Its fun to watch but like most of high risk high reward activities you will likely lose or get lucky and then lose when you try to repeat that luck.
      - alkonaut 6y ago
        There is just one key insight: it’s gambling. It’s like buying a lottery ticket or betting that the outsider team will win the league. With that mindset you are pretty safe. You don’t “invest” in lottery tickets. It’s entertainment with money you can afford to lose. I hope that’s the case for each and every person who bought this stock.
        mcv 6y ago
        I see the stock market in general as a lottery. Or a mix of a lottery and a bit of ponzi scheme, but the lottery has a positive expectation value, unlike real lotteries. And the ponzi scheme still has some real value behind it. The WSB bet is extremely risky of course, but there's absolutely a chance that it will pay off enormously. How big that chance is, I couldn't begin to estimate. From what I've seen, the people who are getting in late know very well that they're likely to lose money, but they're fine with that if they get to stick it to the hedge funds.
    - cwilkes 6y ago
      Why stay out of a stock that’s fluctuating wildly for reasons unrelated to their performance? One whose price is determined by factors probably not known to most investors?
  - Triv888 6y ago
    of course you don't put in money that you are not willing to loose. I bought some GME at around 40 and sold the same day at around 90. I don't have "diamond hands", as they like to say at WSB.
allie1 6y ago
Elon Musk's revenge, Peter Thiel style?
- ohgodplsno 6y ago
  Elon popped in really late, when the stock was already $250. Definitely fuels the dank memes though.
  - dntrkv 6y ago
    Elon drove the price from ~150 to ~240 back down to ~210 in after-hours trading yesterday.
    - jeffrallen 6y ago
      Oh Elon, you missed an obvious 420 there, mate.
  - allie1 6y ago
    I doubt he was sitting on the sidelines even before posting tbh.
    - deleted 6y ago
      [deleted]
  - edm0nd 6y ago
    I think Elon just loves messing with the SEC.
- tzfld 6y ago
  Interesting his involvement in this. Although I'm not quite sure about his motivations.
  - jansan 6y ago
    Isn't he buddies with Chamath Palihapitiya? https://twitter.com/chamath/status/1354105672686702592 https://twitter.com/chamath/status/1354105672686702592
minikites 6y ago
I hope the hedge funds who shorted the stock go out of business and don't get a bailout from the government.
- Rapzid 6y ago
  Is there any evidence they won't just figure a way to ride this out until it crashes. It's going to crash and when that happens it's going to be the "little guy" that bought late holding the bag.
  - andyzweb 6y ago
    something something the market can remain irrational longer than you can stay solvent
  - JumpCrisscross 6y ago
    > won't just figure a way to ride this out until it crashes For one, the calls look like they’re still overpriced relative to the puts. So manufacturing calls via put-call parity would be a starting point. (Spot checked the puts—they seem to break even under 100 per share out to November, so not much juice left there.) It’s also only the leveraged funds burning out. And they don’t only own GameStop shorts. So money will be made bailing them out and cramming down their existing LPs. This kind of a pyramidesque system almost guarantees that the most pain will be felt in the reversion to the mean, not flexion from it.
  - 300bps 6y ago
    If they had infinite money they could do this. But shorting a stock is usually done on margin and if you lose enough money on a short position you’ll get a margin call asking you to deposit more money with your broker. If you don’t do that they’ll buy to cover your position for you.
  - tootie 6y ago
    They already have. They closed their position and got a cash infusion from other investment firms. They will move on and be fine. Meanwhile aside from a handful of savvy players, WSB is going to leave a wake of people losing their nest eggs.
RivieraKid 6y ago
It's surprising that markets are still so obviously irrational.
- phoe-krk 6y ago
  Markets can stay irrational longer than you can stay solvent -- Keynes.
  - RivieraKid 6y ago
    Yeah, I know... But it's annoying to see money getting transfered from people who are good at valuation to people who're clueless.
    - thatswrong0 6y ago
      > people who are good at valuation I wouldn't call people who short 140% of available shares good at anything
      - stephenhuey 6y ago
        Greedy gamblers who assume everyone else is incapable of calling their bluff?
    - _jal 6y ago
      And here I've been told that the market price is the price, because that's the price, and don't get emotional about the market. I guess that only applies when the 'right' people are involved?
      - johnhartigun 6y ago
        See, this is what I mean by clueless. Price and valuation are completely different concepts. An asset that will never generate any cash has a valuation of zero, but its market price could be anything.
sirffuzzylogik 6y ago
Citadel and Point72 stepped in and closed the hedge fund position ($3 billion) on GME [1]. The regulators are not moving/commenting just yet, I am curious to see the repercussions of this and if Reddit crashing the markets it the new norm. [1] https://www.cnbc.com/2021/01/27/hedge-fund-targeted-by-reddit-board-melvin-capital-closed-out-of-gamestop-short-position-tuesday.html https://www.cnbc.com/2021/01/27/hedge-fund-targeted-by-reddi... EDIT: My bad, the hedge fund was not closed, just its GME short position. I amended this.
- fractionalhare 6y ago
  No, that article says it closed out of its position in GME. It hasn't closed.
- addicted 6y ago
  I'm pretty sure Citadel isn't an owner, but rather, is able to get a cheap position in the hedge fund, thanks to the short term irrationality.
- JumpCrisscross 6y ago
  > [Melvin Capital] was also closed by its owner, Citadel No. It closed out its GME short. It then got a bailout from Point72 (f/k/a SAC) and Citadel. To my knowledge, the latter and Melvin are not affiliated.
  - deleted 6y ago
    [deleted]
- tylerjaywood 6y ago
  > Reddit crashing the markets Source on that? Even at this prices GME is ~$20b market cap in an exchange that represents ~$25t in market cap. I don't know that it really poses a systemic risk to anyone who didn't take out insanely risky short positions on the company in the first place
- boredumb 6y ago
  The short interest is still over 100% and unless they offloaded it into another institutional investor it is simply not possible.
throw1234651234 6y ago
I wasn't following any of this until a few days ago. Are there any fundamentals here, did GameStop ever pivot from their CD exchanging/rental business somehow? I have a hard time imagining how they could without trying to compete with Steam and EA's platform. The ideal situation for them here is that they hold enough of their own stock to sell some now and try to pivot with all the funding. As far as people looking to speculate - you probably genuinely are too late, despite me being a supporter of riding bubbles like this, since obviously it works, sometimes.
- deleted 6y ago
  [deleted]
- searine 6y ago
  >did GameStop ever pivot from This stock now has zero to do with the GameStop business. It is traders fighting other traders causing a wild fluctuation in the stock. GME is just the arena for the fight.
- flawi 6y ago
  While true that the current situation is pretty far detached from the fundamentals, it's not 100% speculative. GameStop just named Ryan Cohen and 2 other execs from Chewy on the board after Ryan pitched an e-commerce based strategy similar to what they did with Chewy. People have some faith in that, certainly enough to believe that the shorts are misplaced.
DSingularity 6y ago
Now this will probably repeat for other heavily shorted stocks. Look at EXPR and AMC. Crazy, but in a strange way makes sense.
- pwinnski 6y ago
  No other stock is currently shorted at > 100% of outstanding shares, so it will not repeat in the same way. Perhaps after this, it will not repeat for a very long time, since one might hope hedge funds would be more careful about shorting more shares than exist!
smashah 6y ago
This is the first time a stock rally makes perfect sense to me. Power to the people.
sidcool 6y ago
/r/OutOfTheLoop, summary anyone?
- Kye 6y ago
  Short sellers basically bet against troubled stocks. /r/WallStreetBets called them on it by pumping some of those stocks up, costing short sellers billions.
  - sidcool 6y ago
    But why? Who will profit?
    - ronyfadel 6y ago
      Short sellers get slaughtered, /r/wallstreetbet pumpers sell before the inevitable crash and profit.
    - Miner49er 6y ago
      Anyone who bought at the right time and sells at the right time. Certainly a lot of people on /r/WSB.
    - scanr 6y ago
      Those betting against the short sellers profit. The short sellers are obliged to buy stock to cover their short positions which are suddenly quite expensive. Their buying then further creates demand pushing the price up even more - a short squeeze.
    - delecti 6y ago
      The "but why" is essentially "because fuck those guys". I'm not sure there was any more than that. As for who will profit, probably not the people who were shorting GME, but at this point it's impossible to say.
    - kristjansson 6y ago
      Some trades are strategy and some are tactics. This is the latter.
Kye 6y ago
The same phenomenon has Blockbuster worth 5 cents a share, or about what GameStop offers for trade-ins.
edm0nd 6y ago
Making boomer hedge funds bleed.
throwawaygal7 6y ago
Somewhere a middle American game stop manager is exiting a position acquired over decades, for a small profit but enough to make him smile. Wallstreet is the outer rim of hell.
whoopdedo 6y ago
I don't know if it's related but I can't log on to Vanguard today. Long load times, lots of errors, or I get the message "Portions of our site are temporarily unavailable." (edit) It's working again. But now I see that everything else on the market is going down. Coincidence, or are the hedge funds cashing out profit from other places to cover what they're losing in this squeeze?
Tycho 6y ago
I assume the collective capital of the Robinhood/WSB crowd is not particularly massive compared to what many large fund managers have at their disposal (not to mention the leverage they have access to). If a bunch of Redditors can squeeze a large cap stock just because it has a high level of short interest, why don't institutional players use this strategy?
- mywittyname 6y ago
  > why don't institutional players use this strategy? They do. It is a very high risk endeavor though and missing the mark could lead to bankruptcy and success could mean action from the SEC. But catching someone in a short squeeze is pretty damn profitable. Part of the success here probably has to do with underestimating the influence of wsb. This isn't the first time they've taken down short sellers (Telsa), but it's the most high profile time.
  - Miner49er 6y ago
    Yes, two examples: Porsche in 2008 with Volkswagen and Martin Shkreli with KBIO in 2015. Neither faced any significant legal consequences and both made a huge return. https://www.marketwatch.com/story/kalobios-short-sellers-facing-squeeze-as-ceo-shkreli-says-will-no-longer-lend-stock-2015-11-27 https://www.marketwatch.com/story/kalobios-short-sellers-fac...
    - elliekelly 6y ago
      The only reason Shkreli got away with it was because the DOJ brought (unrelated) criminal charges. If the DOJ hadn’t stepped in the SEC absolutely would have. The VW situation happened on a wildly different Wall Street and under a wildly different SEC. Things have changed since 2008 and pursuing that strategy today would be significantly more risky from a regulatory perspective. The SEC sent a clear message with Phil Falcone.
  - ssharp 6y ago
    It's not easy to generate the kind of momentum you need to pull off something like what's been happening. WSB has been pushing GME for months. Then things got heated with them and the major shorts, it brought more attention to it, and GME shot up quite a bit. That amplified the story even more, which brought it more demand for GME. That cycle has just continued, building more and more interest each time. I don't believe the story has come close to reaching its peak yet either. I suspect there will start to be some major headlines still this week, which will bring in more speculative interest. Then, at some point, the story fizzles. The gains stop and the price will collapse. It's going to be an interesting week or so watching this all play out.
lainga 6y ago
Some of the household traders seem to be partly doing this out of spite towards hedge funds. It's like we're seeing the first mass protest conducted via financial markets.
curiousllama 6y ago
There's shortly going to be chaos when everyone learns a basic lesson: you have to sell into strength, not weakness. When the stock hit $100, people bought. Same at $250. It'll be the same at $420.69, $1,000 - whatever. But whenever it crests, it'll sink FAST. A sell order at $1000 will get filled at $200. Everyone knows it. Which makes for an interesting collective action problem: you have to hold hold hold - and then be the FIRST to dump. Not the third, the FIRST. WallStreetBets will be anarchy...
- me_me_me 6y ago
  Can you explain to me what happens if people are not going to sell. Given that there is more shorts then actual stock. Would it mean that the shorts would be forced to take a loss and buy that stock? I have very rudimentary knowledge of how this works, asking as I wonder how it actually works.
  - Miner49er 6y ago
    > Given that there is more shorts then actual stock. Would it mean that the shorts would be forced to take a loss and buy that stock? Yes, that's what a short squeeze is. They are losing more and more money as this goes up, and at some point they won't have more money to lose. They'll have to buy (in order to cover their short), which will further drive the price up.
    - antoniuschan99 6y ago
      For the people who aren't shorting they can just hold it (indefinitely theoretically), but the people who are shorting it have contracts that will expire, thus they have to buy up more shares to counteract their shorted contracts?
      - Miner49er 6y ago
        The way shorting is done, is you borrow shares from someone who owns some, and then you sell it. You now have cash. Later, you can go and buy it from someone (for hopefully less than you sold it for) and return the share. You keep (or lose) the difference. So yeah, if the long holders just keep holding, it'll keep going up and those that are short will owe more and more to their lenders (and paying more and more in interest, I think). Even if they want to cover their short, there's not enough shares to go around for them to buy. This is why it's being called an "infinite squeeze". They've shorted the stock more than there are actually shares out there, so it's difficult to cover. There's some more factors at play when you consider option contracts, I think.

95 points by spurgu 6y ago

I wish I groked all the dynamics at play. I don't fully understand it but it's a wild ride to see this happen. I heard AMC is going through a similar squeeze this week and I don't know how much I would dare to invest with my limited knowledge.

jansan 6y ago
> I wish I groked all the dynamics at play. In this case I would recommend to stay out of the game. Just enjoy the show.
- DyslexicAtheist 6y ago
  why? it's not illegal. risky yes, but anyone can buy stocks.
  - jansan 6y ago
    Not illegal at all, but someone will pay at the end. There was something similar going on in the past with the Hunt brothers (look it up on Wikipedia). Everybody who followed them got burnt severely because the big guys suddenly had the rules changed.
  - spijdar 6y ago
    With absolutely zero domain knowledge and not really familiar with the situation, I've got a strong gut feeling that it's gonna be easy to get burned here. Hopefully I'm wrong, for all the people involved's stakes.
    - unforeseen9991 6y ago
      It's actually more dangerous if they don't get burned. Then they think they can get away with their gamble again, but they put even more money in next time.
    - Taylor_OD 6y ago
      Exactly. My friend made about 10K off of $200 in GameStop calls. He got the advice from his buddy who is a WSBs junkie. That buddy is also bankrupt and his only source of income is WSB. I cant image what his taxes will look like this year. Its fun to watch but like most of high risk high reward activities you will likely lose or get lucky and then lose when you try to repeat that luck.
    - alkonaut 6y ago
      There is just one key insight: it’s gambling. It’s like buying a lottery ticket or betting that the outsider team will win the league. With that mindset you are pretty safe. You don’t “invest” in lottery tickets. It’s entertainment with money you can afford to lose. I hope that’s the case for each and every person who bought this stock.
      - mcv 6y ago
        I see the stock market in general as a lottery. Or a mix of a lottery and a bit of ponzi scheme, but the lottery has a positive expectation value, unlike real lotteries. And the ponzi scheme still has some real value behind it. The WSB bet is extremely risky of course, but there's absolutely a chance that it will pay off enormously. How big that chance is, I couldn't begin to estimate. From what I've seen, the people who are getting in late know very well that they're likely to lose money, but they're fine with that if they get to stick it to the hedge funds.
  - cwilkes 6y ago
    Why stay out of a stock that’s fluctuating wildly for reasons unrelated to their performance? One whose price is determined by factors probably not known to most investors?
- Triv888 6y ago
  of course you don't put in money that you are not willing to loose. I bought some GME at around 40 and sold the same day at around 90. I don't have "diamond hands", as they like to say at WSB.

allie1 6y ago

Elon Musk's revenge, Peter Thiel style?

ohgodplsno 6y ago
Elon popped in really late, when the stock was already $250. Definitely fuels the dank memes though.
- dntrkv 6y ago
  Elon drove the price from ~150 to ~240 back down to ~210 in after-hours trading yesterday.
  - jeffrallen 6y ago
    Oh Elon, you missed an obvious 420 there, mate.
- allie1 6y ago
  I doubt he was sitting on the sidelines even before posting tbh.
  - deleted 6y ago
    [deleted]
- edm0nd 6y ago
  I think Elon just loves messing with the SEC.
tzfld 6y ago
Interesting his involvement in this. Although I'm not quite sure about his motivations.
- jansan 6y ago
  Isn't he buddies with Chamath Palihapitiya? https://twitter.com/chamath/status/1354105672686702592 https://twitter.com/chamath/status/1354105672686702592

minikites 6y ago

I hope the hedge funds who shorted the stock go out of business and don't get a bailout from the government.

Rapzid 6y ago
Is there any evidence they won't just figure a way to ride this out until it crashes. It's going to crash and when that happens it's going to be the "little guy" that bought late holding the bag.
- andyzweb 6y ago
  something something the market can remain irrational longer than you can stay solvent
- JumpCrisscross 6y ago
  > won't just figure a way to ride this out until it crashes For one, the calls look like they’re still overpriced relative to the puts. So manufacturing calls via put-call parity would be a starting point. (Spot checked the puts—they seem to break even under 100 per share out to November, so not much juice left there.) It’s also only the leveraged funds burning out. And they don’t only own GameStop shorts. So money will be made bailing them out and cramming down their existing LPs. This kind of a pyramidesque system almost guarantees that the most pain will be felt in the reversion to the mean, not flexion from it.
- 300bps 6y ago
  If they had infinite money they could do this. But shorting a stock is usually done on margin and if you lose enough money on a short position you’ll get a margin call asking you to deposit more money with your broker. If you don’t do that they’ll buy to cover your position for you.
- tootie 6y ago
  They already have. They closed their position and got a cash infusion from other investment firms. They will move on and be fine. Meanwhile aside from a handful of savvy players, WSB is going to leave a wake of people losing their nest eggs.

RivieraKid 6y ago

It's surprising that markets are still so obviously irrational.

phoe-krk 6y ago
Markets can stay irrational longer than you can stay solvent -- Keynes.
- RivieraKid 6y ago
  Yeah, I know... But it's annoying to see money getting transfered from people who are good at valuation to people who're clueless.
  - thatswrong0 6y ago
    > people who are good at valuation I wouldn't call people who short 140% of available shares good at anything
    - stephenhuey 6y ago
      Greedy gamblers who assume everyone else is incapable of calling their bluff?
  - _jal 6y ago
    And here I've been told that the market price is the price, because that's the price, and don't get emotional about the market. I guess that only applies when the 'right' people are involved?
    - johnhartigun 6y ago
      See, this is what I mean by clueless. Price and valuation are completely different concepts. An asset that will never generate any cash has a valuation of zero, but its market price could be anything.

sirffuzzylogik 6y ago

Citadel and Point72 stepped in and closed the hedge fund position ($3 billion) on GME [1]. The regulators are not moving/commenting just yet, I am curious to see the repercussions of this and if Reddit crashing the markets it the new norm. [1] https://www.cnbc.com/2021/01/27/hedge-fund-targeted-by-reddit-board-melvin-capital-closed-out-of-gamestop-short-position-tuesday.html https://www.cnbc.com/2021/01/27/hedge-fund-targeted-by-reddi... EDIT: My bad, the hedge fund was not closed, just its GME short position. I amended this.

fractionalhare 6y ago
No, that article says it closed out of its position in GME. It hasn't closed.
addicted 6y ago
I'm pretty sure Citadel isn't an owner, but rather, is able to get a cheap position in the hedge fund, thanks to the short term irrationality.
JumpCrisscross 6y ago
> [Melvin Capital] was also closed by its owner, Citadel No. It closed out its GME short. It then got a bailout from Point72 (f/k/a SAC) and Citadel. To my knowledge, the latter and Melvin are not affiliated.
- deleted 6y ago
  [deleted]
tylerjaywood 6y ago
> Reddit crashing the markets Source on that? Even at this prices GME is ~$20b market cap in an exchange that represents ~$25t in market cap. I don't know that it really poses a systemic risk to anyone who didn't take out insanely risky short positions on the company in the first place
boredumb 6y ago
The short interest is still over 100% and unless they offloaded it into another institutional investor it is simply not possible.

throw1234651234 6y ago

I wasn't following any of this until a few days ago. Are there any fundamentals here, did GameStop ever pivot from their CD exchanging/rental business somehow? I have a hard time imagining how they could without trying to compete with Steam and EA's platform. The ideal situation for them here is that they hold enough of their own stock to sell some now and try to pivot with all the funding. As far as people looking to speculate - you probably genuinely are too late, despite me being a supporter of riding bubbles like this, since obviously it works, sometimes.

deleted 6y ago
[deleted]
searine 6y ago
>did GameStop ever pivot from This stock now has zero to do with the GameStop business. It is traders fighting other traders causing a wild fluctuation in the stock. GME is just the arena for the fight.
flawi 6y ago
While true that the current situation is pretty far detached from the fundamentals, it's not 100% speculative. GameStop just named Ryan Cohen and 2 other execs from Chewy on the board after Ryan pitched an e-commerce based strategy similar to what they did with Chewy. People have some faith in that, certainly enough to believe that the shorts are misplaced.

DSingularity 6y ago

Now this will probably repeat for other heavily shorted stocks. Look at EXPR and AMC. Crazy, but in a strange way makes sense.

pwinnski 6y ago
No other stock is currently shorted at > 100% of outstanding shares, so it will not repeat in the same way. Perhaps after this, it will not repeat for a very long time, since one might hope hedge funds would be more careful about shorting more shares than exist!

smashah 6y ago

This is the first time a stock rally makes perfect sense to me. Power to the people.

sidcool 6y ago

/r/OutOfTheLoop, summary anyone?

Kye 6y ago
Short sellers basically bet against troubled stocks. /r/WallStreetBets called them on it by pumping some of those stocks up, costing short sellers billions.
- sidcool 6y ago
  But why? Who will profit?
  - ronyfadel 6y ago
    Short sellers get slaughtered, /r/wallstreetbet pumpers sell before the inevitable crash and profit.
  - Miner49er 6y ago
    Anyone who bought at the right time and sells at the right time. Certainly a lot of people on /r/WSB.
  - scanr 6y ago
    Those betting against the short sellers profit. The short sellers are obliged to buy stock to cover their short positions which are suddenly quite expensive. Their buying then further creates demand pushing the price up even more - a short squeeze.
  - delecti 6y ago
    The "but why" is essentially "because fuck those guys". I'm not sure there was any more than that. As for who will profit, probably not the people who were shorting GME, but at this point it's impossible to say.
  - kristjansson 6y ago
    Some trades are strategy and some are tactics. This is the latter.

Kye 6y ago

The same phenomenon has Blockbuster worth 5 cents a share, or about what GameStop offers for trade-ins.

edm0nd 6y ago

Making boomer hedge funds bleed.

throwawaygal7 6y ago

Somewhere a middle American game stop manager is exiting a position acquired over decades, for a small profit but enough to make him smile. Wallstreet is the outer rim of hell.

whoopdedo 6y ago

I don't know if it's related but I can't log on to Vanguard today. Long load times, lots of errors, or I get the message "Portions of our site are temporarily unavailable." (edit) It's working again. But now I see that everything else on the market is going down. Coincidence, or are the hedge funds cashing out profit from other places to cover what they're losing in this squeeze?

Tycho 6y ago

I assume the collective capital of the Robinhood/WSB crowd is not particularly massive compared to what many large fund managers have at their disposal (not to mention the leverage they have access to). If a bunch of Redditors can squeeze a large cap stock just because it has a high level of short interest, why don't institutional players use this strategy?

mywittyname 6y ago
> why don't institutional players use this strategy? They do. It is a very high risk endeavor though and missing the mark could lead to bankruptcy and success could mean action from the SEC. But catching someone in a short squeeze is pretty damn profitable. Part of the success here probably has to do with underestimating the influence of wsb. This isn't the first time they've taken down short sellers (Telsa), but it's the most high profile time.
- Miner49er 6y ago
  Yes, two examples: Porsche in 2008 with Volkswagen and Martin Shkreli with KBIO in 2015. Neither faced any significant legal consequences and both made a huge return. https://www.marketwatch.com/story/kalobios-short-sellers-facing-squeeze-as-ceo-shkreli-says-will-no-longer-lend-stock-2015-11-27 https://www.marketwatch.com/story/kalobios-short-sellers-fac...
  - elliekelly 6y ago
    The only reason Shkreli got away with it was because the DOJ brought (unrelated) criminal charges. If the DOJ hadn’t stepped in the SEC absolutely would have. The VW situation happened on a wildly different Wall Street and under a wildly different SEC. Things have changed since 2008 and pursuing that strategy today would be significantly more risky from a regulatory perspective. The SEC sent a clear message with Phil Falcone.
- ssharp 6y ago
  It's not easy to generate the kind of momentum you need to pull off something like what's been happening. WSB has been pushing GME for months. Then things got heated with them and the major shorts, it brought more attention to it, and GME shot up quite a bit. That amplified the story even more, which brought it more demand for GME. That cycle has just continued, building more and more interest each time. I don't believe the story has come close to reaching its peak yet either. I suspect there will start to be some major headlines still this week, which will bring in more speculative interest. Then, at some point, the story fizzles. The gains stop and the price will collapse. It's going to be an interesting week or so watching this all play out.

lainga 6y ago

Some of the household traders seem to be partly doing this out of spite towards hedge funds. It's like we're seeing the first mass protest conducted via financial markets.

curiousllama 6y ago

There's shortly going to be chaos when everyone learns a basic lesson: you have to sell into strength, not weakness. When the stock hit $100, people bought. Same at $250. It'll be the same at $420.69, $1,000 - whatever. But whenever it crests, it'll sink FAST. A sell order at $1000 will get filled at $200. Everyone knows it. Which makes for an interesting collective action problem: you have to hold hold hold - and then be the FIRST to dump. Not the third, the FIRST. WallStreetBets will be anarchy...

me_me_me 6y ago
Can you explain to me what happens if people are not going to sell. Given that there is more shorts then actual stock. Would it mean that the shorts would be forced to take a loss and buy that stock? I have very rudimentary knowledge of how this works, asking as I wonder how it actually works.
- Miner49er 6y ago
  > Given that there is more shorts then actual stock. Would it mean that the shorts would be forced to take a loss and buy that stock? Yes, that's what a short squeeze is. They are losing more and more money as this goes up, and at some point they won't have more money to lose. They'll have to buy (in order to cover their short), which will further drive the price up.
  - antoniuschan99 6y ago
    For the people who aren't shorting they can just hold it (indefinitely theoretically), but the people who are shorting it have contracts that will expire, thus they have to buy up more shares to counteract their shorted contracts?
    - Miner49er 6y ago
      The way shorting is done, is you borrow shares from someone who owns some, and then you sell it. You now have cash. Later, you can go and buy it from someone (for hopefully less than you sold it for) and return the share. You keep (or lose) the difference. So yeah, if the long holders just keep holding, it'll keep going up and those that are short will owe more and more to their lenders (and paying more and more in interest, I think). Even if they want to cover their short, there's not enough shares to go around for them to buy. This is why it's being called an "infinite squeeze". They've shorted the stock more than there are actually shares out there, so it's difficult to cover. There's some more factors at play when you consider option contracts, I think.