4 ms·

I'm curious, if this is the case, why doesn't the market realize this and short sell like crazy right now, given it's clear the price isn't sustainable. That wo

I'm curious, if this is the case, why doesn't the market realize this and short sell like crazy right now, given it's clear the price isn't sustainable. That would then generate more negative price pressure and generally keep the whole thing from happening in the first place, no?

objektif 6y ago
Market can remain irrational longer than your wallet can remain solvent or something like that.
- gregable 6y ago
  Sure, but irrational enough not to short a $6 stock priced at $300?
  - gmadsen 6y ago
    just because it was held at $6, doesn't mean that is the fair market price. These Hedge funds had significant incentive to bankrupt this company. 300+ is most likely a bubble, but $50-$90 is completely reasonable looking at the fundamentals. And besides, traditional wall street fundamentals are not the end all be all of a stocks value. Tesla is living proof of that.
    - TylerE 6y ago
      What fundamentals? Retail is a liability, and they're retail that's ESPECIALLY being eaten alive by online.
      - Clewza313 6y ago
        The bull case is that GME's own online revenue is trending up and that they're well positioned to grow more. I personally don't buy it, particularly at $300 a share, but GME is not entirely bricks & mortar.
      - flatline 6y ago
        This was at least part of the catalyst: https://m.youtube.com/watch?v=alntJzg0Um4 https://m.youtube.com/watch?v=alntJzg0Um4 I don’t fully buy it either but it’s not irrational. GameStop still sells a lot of games. Online is gradually taking over but it has been for what 20 years now and people still go to the store and consoles still have disk drives. B&M is not going away any time soon, and in some ways I think the hardest hits have already come and gone, what’s left now is likely to stay.
        cameldrv 6y ago
        Some consoles have disk drives. Playstation released their "Digital Edition" Playstation 5 which doesn't have a disk drive, and Microsoft released the Xbox Series S which also doesn't have a disk drive. Phones and tablets never did have disk drives, and the gaming market on them is large. I think it's pretty clear that the days of physically buying games are quickly coming to an end. Years ago there were chains of computer software stores, and long after that, stores like Best Buy had huge computer software sections. The same thing will happen to games now that every console is connected to high speed internet. Gamestop has lost money for the past two years, and it only shows signs of getting worse.
      - bsder 6y ago
        > Retail is a liability, and they're retail that's ESPECIALLY being eaten alive by online. Retail may be a liability. But real estate is not. GameStop has small stores that should shut down. However, they also a not insignifcant number bigger stores that can become "gaming places" once we get Covid under control. Being a "Safe place for Mom to drop the kids to play Pokemon" has real value. Not everything must be online.
        TylerE 6y ago
        Do they own real estate? Every GS I’ve ever seen is in a strip mall, where they are surely renting.
        bsder 6y ago
        Yes, they do. But more in areas where real estate is cheap like the Midwest.
    - gregable 6y ago
      Perhaps, pick your favorite number. I think it's pretty clear nobody believes fundamentals support $300 though. Was wondering why market short pressure doesn't prevent it from getting that high.
      - simplemen 6y ago
        At this point, no broker is lending gme to retail investors. However, if you are market maker, you should be able to short it still.
  - pishpash 6y ago
    You need unknowable amounts of capital to pull this off. $300 could be $600 tomorrow (as example).
- ehnto 6y ago
  It's worth noting a lot of the investors are holding for ideology, so that is certainly not your typical hold. Many may very well hold all the way back down to their buy in. What I am interested in is how far this can get twisted. Are there more mechanisms at the hedge funds disposal? Will the financial institutions step in at all?
deleted 6y ago
[deleted]
nostrademons 6y ago
That's happening. I just tried to short GME and my brokerage gave me an error message that it was "hard-to-borrow" and no shares were available at this time, and to check back tomorrow.
- gregable 6y ago
  That's what I figured might be the limiting factor. At some point, nobody wants to take the other end of the short, so it becomes impossible to short further.
amluto 6y ago
I’m not convinced that the economics work like this. Suppose there are n real shares, i.e. longs - shorts = n. A short squeeze happens if the number of shorts exceeds the number of long shares that aren’t trying to squeeze the shorts. That’s longs - squeezers < shorts. Rearranging gives n < squeezers. So the short holders are in trouble if the number of squeezing shares exceeds the number that actually exist. Imagine there’s a near-squeeze situation, and someone shorts more shares. This drives the price down, which makes it less expensive for squeezers to buy shares, which exacerbates the problem. This is complicated by margin calls and their institutional equivalents. This cuts both ways. Enough downward price pressure could cause some longs to get margin called. But more shorting also means more danger. If I were the SEC, I would consider restricting the total short interest to a fixed fraction of total outstanding shares to improve market stability. I don’t know whether this would be a good policy overall.

objektif 6y ago

Market can remain irrational longer than your wallet can remain solvent or something like that.

gregable 6y ago
Sure, but irrational enough not to short a $6 stock priced at $300?
- gmadsen 6y ago
  just because it was held at $6, doesn't mean that is the fair market price. These Hedge funds had significant incentive to bankrupt this company. 300+ is most likely a bubble, but $50-$90 is completely reasonable looking at the fundamentals. And besides, traditional wall street fundamentals are not the end all be all of a stocks value. Tesla is living proof of that.
  - TylerE 6y ago
    What fundamentals? Retail is a liability, and they're retail that's ESPECIALLY being eaten alive by online.
    - Clewza313 6y ago
      The bull case is that GME's own online revenue is trending up and that they're well positioned to grow more. I personally don't buy it, particularly at $300 a share, but GME is not entirely bricks & mortar.
    - flatline 6y ago
      This was at least part of the catalyst: https://m.youtube.com/watch?v=alntJzg0Um4 https://m.youtube.com/watch?v=alntJzg0Um4 I don’t fully buy it either but it’s not irrational. GameStop still sells a lot of games. Online is gradually taking over but it has been for what 20 years now and people still go to the store and consoles still have disk drives. B&M is not going away any time soon, and in some ways I think the hardest hits have already come and gone, what’s left now is likely to stay.
      - cameldrv 6y ago
        Some consoles have disk drives. Playstation released their "Digital Edition" Playstation 5 which doesn't have a disk drive, and Microsoft released the Xbox Series S which also doesn't have a disk drive. Phones and tablets never did have disk drives, and the gaming market on them is large. I think it's pretty clear that the days of physically buying games are quickly coming to an end. Years ago there were chains of computer software stores, and long after that, stores like Best Buy had huge computer software sections. The same thing will happen to games now that every console is connected to high speed internet. Gamestop has lost money for the past two years, and it only shows signs of getting worse.
    - bsder 6y ago
      > Retail is a liability, and they're retail that's ESPECIALLY being eaten alive by online. Retail may be a liability. But real estate is not. GameStop has small stores that should shut down. However, they also a not insignifcant number bigger stores that can become "gaming places" once we get Covid under control. Being a "Safe place for Mom to drop the kids to play Pokemon" has real value. Not everything must be online.
      - TylerE 6y ago
        Do they own real estate? Every GS I’ve ever seen is in a strip mall, where they are surely renting.
        bsder 6y ago
        Yes, they do. But more in areas where real estate is cheap like the Midwest.
  - gregable 6y ago
    Perhaps, pick your favorite number. I think it's pretty clear nobody believes fundamentals support $300 though. Was wondering why market short pressure doesn't prevent it from getting that high.
    - simplemen 6y ago
      At this point, no broker is lending gme to retail investors. However, if you are market maker, you should be able to short it still.
- pishpash 6y ago
  You need unknowable amounts of capital to pull this off. $300 could be $600 tomorrow (as example).
ehnto 6y ago
It's worth noting a lot of the investors are holding for ideology, so that is certainly not your typical hold. Many may very well hold all the way back down to their buy in. What I am interested in is how far this can get twisted. Are there more mechanisms at the hedge funds disposal? Will the financial institutions step in at all?

deleted 6y ago

[deleted]

nostrademons 6y ago

That's happening. I just tried to short GME and my brokerage gave me an error message that it was "hard-to-borrow" and no shares were available at this time, and to check back tomorrow.

gregable 6y ago
That's what I figured might be the limiting factor. At some point, nobody wants to take the other end of the short, so it becomes impossible to short further.

amluto 6y ago

I’m not convinced that the economics work like this. Suppose there are n real shares, i.e. longs - shorts = n. A short squeeze happens if the number of shorts exceeds the number of long shares that aren’t trying to squeeze the shorts. That’s longs - squeezers < shorts. Rearranging gives n < squeezers. So the short holders are in trouble if the number of squeezing shares exceeds the number that actually exist. Imagine there’s a near-squeeze situation, and someone shorts more shares. This drives the price down, which makes it less expensive for squeezers to buy shares, which exacerbates the problem. This is complicated by margin calls and their institutional equivalents. This cuts both ways. Enough downward price pressure could cause some longs to get margin called. But more shorting also means more danger. If I were the SEC, I would consider restricting the total short interest to a fixed fraction of total outstanding shares to improve market stability. I don’t know whether this would be a good policy overall.