4 ms·

Why would shorting Gamestop mean making it to go bankrupt? The falling stock price of a company doesn't cause a company to go bankrupt, the causality is in the

by vegesm 6y ago

Why would shorting Gamestop mean making it to go bankrupt? The falling stock price of a company doesn't cause a company to go bankrupt, the causality is in the other direction. Putting downward pressure on price is useful only if you want to do a hostile takeover.

NoOneNew 6y ago
Hi, let me google "how short sellers hurt companies" for you. First link of one practice: short and distort https://www.investopedia.com/articles/analyst/030102.asp https://www.investopedia.com/articles/analyst/030102.asp You can google more yourself.
- vegesm 6y ago
  which is all illegal and there is no indication that was happening with Gamestop
  - orestarod 6y ago
    Well your average Joe buying stocks with his hard earned money and then doing whatever he wants with them is not illegal too, but that's being debated by the parties with the appropriate interests.
- hinkley 6y ago
  I believe I learned the term Short Squeeze while holding Maxwell (MXWL) shares. I sold that position years before Tesla bought them, but one thing I recall is that there were a few people on the message boards that were pointing out how silly-high the short interest was, and that was, IIRC, in the 30% of float range. As we all know, MXWL wasn't bankrupted, but neither did they thrive on their own. GME also has 4 times the short interest that those people were talking about. It also lacks a trove of patents that are worth something even in a fire sale. In fact the only thing they really have, IMO, is ThinkGeek, and the last time I looked they had fucked that up by merging its catalog into their own hamfisted storefront. Honestly, given the current generation of consoles, I think they may be better off rebranding as ThinkGeek and having a Gamestop section at each store. We'll see if the new guy has any ideas like that.
stonogo 6y ago
Because Gamestop is a business that is in the process of adapting to changing market conditions, which generally requires capital, and when market analysts go big on shorting in public it depresses stock price, and issuing stock is a major common method by which businesses raise capital. As another example, lots of people assume Elon Musk got mad at short sellers because he took it personally, when in fact they were fucking with his ability to raise money he needed to ramp up production and meet manufacturing goals. These things don't happen in a vacuum. Large funds making public bets against a company have a material impact on that company's liquidity.
- sangnoir 6y ago
  Short-sellers are part of the free market. They are how the equation balances itself when trying to find the "true value" of a concern, or at least an approximation thereof. Obviously the person who owns stock, or is set to earn billions when the share price reaches a certain level is going to be adversarial to someone whose actions result in the share price being depressed - even if that is the fair value. > Large funds making public bets against a company have a material impact on that company's liquidity. There are always bigger fish - and if the public bet is wrong, someone can, and will earn money at the funds' cost. Edit: shareholders dislike shorts the same way employers dislike employees sharing salary information; it's a losing proposition for them, but a fair one.
  - qes 6y ago
    > Short-sellers are part of the free market Not when they get to simply turn off the half of the market moving against them they aren't.
  - stonogo 6y ago
    I would like you to show me where this free market is, because it certainly isn't NYSE. The minute anything unexpected happens we're hit with trading halts, brokers riding the line of insolvency, SEC investigations, and congressional freakouts.
- mike00632 6y ago
shakezula 6y ago
I think focusing on how it hurt GameStop isn’t the right perspective here. I think it’s more about how greedy and over-leveraged the short holders were. When average Joe goes crazy over-leveraged, the entire world says “well duhh, you took a risk and now you have to pay.” But when a hedge fund does it, they get to just make a call to turn the market off for a few hours and try to bail out their shorts? The hypocrisy is stunning.
- mike00632 6y ago
  "Over leveraged" typically means you traded too much on credit in proportion to how much collateral you have, not that the trade is risky. A very large short position is reasonable for a company that is likely to go out of business.
  - shakezula 6y ago
    I understand what over leveraged means. This was /also/ an incredibly risky short to start. I’m not convinced that GameStop was ready to go out of business. Struggling, sure, pandemic and all that, and that would justify a put position, but the market also reacted exactly how it’s allowed to and called out a short positions bluff.

by vegesm 6y ago

NoOneNew 6y ago

Hi, let me google "how short sellers hurt companies" for you. First link of one practice: short and distort https://www.investopedia.com/articles/analyst/030102.asp https://www.investopedia.com/articles/analyst/030102.asp You can google more yourself.

vegesm 6y ago
which is all illegal and there is no indication that was happening with Gamestop
- orestarod 6y ago
  Well your average Joe buying stocks with his hard earned money and then doing whatever he wants with them is not illegal too, but that's being debated by the parties with the appropriate interests.
hinkley 6y ago
I believe I learned the term Short Squeeze while holding Maxwell (MXWL) shares. I sold that position years before Tesla bought them, but one thing I recall is that there were a few people on the message boards that were pointing out how silly-high the short interest was, and that was, IIRC, in the 30% of float range. As we all know, MXWL wasn't bankrupted, but neither did they thrive on their own. GME also has 4 times the short interest that those people were talking about. It also lacks a trove of patents that are worth something even in a fire sale. In fact the only thing they really have, IMO, is ThinkGeek, and the last time I looked they had fucked that up by merging its catalog into their own hamfisted storefront. Honestly, given the current generation of consoles, I think they may be better off rebranding as ThinkGeek and having a Gamestop section at each store. We'll see if the new guy has any ideas like that.

stonogo 6y ago

Because Gamestop is a business that is in the process of adapting to changing market conditions, which generally requires capital, and when market analysts go big on shorting in public it depresses stock price, and issuing stock is a major common method by which businesses raise capital. As another example, lots of people assume Elon Musk got mad at short sellers because he took it personally, when in fact they were fucking with his ability to raise money he needed to ramp up production and meet manufacturing goals. These things don't happen in a vacuum. Large funds making public bets against a company have a material impact on that company's liquidity.

sangnoir 6y ago
Short-sellers are part of the free market. They are how the equation balances itself when trying to find the "true value" of a concern, or at least an approximation thereof. Obviously the person who owns stock, or is set to earn billions when the share price reaches a certain level is going to be adversarial to someone whose actions result in the share price being depressed - even if that is the fair value. > Large funds making public bets against a company have a material impact on that company's liquidity. There are always bigger fish - and if the public bet is wrong, someone can, and will earn money at the funds' cost. Edit: shareholders dislike shorts the same way employers dislike employees sharing salary information; it's a losing proposition for them, but a fair one.
- qes 6y ago
  > Short-sellers are part of the free market Not when they get to simply turn off the half of the market moving against them they aren't.
- stonogo 6y ago
  I would like you to show me where this free market is, because it certainly isn't NYSE. The minute anything unexpected happens we're hit with trading halts, brokers riding the line of insolvency, SEC investigations, and congressional freakouts.
mike00632 6y ago

shakezula 6y ago

I think focusing on how it hurt GameStop isn’t the right perspective here. I think it’s more about how greedy and over-leveraged the short holders were. When average Joe goes crazy over-leveraged, the entire world says “well duhh, you took a risk and now you have to pay.” But when a hedge fund does it, they get to just make a call to turn the market off for a few hours and try to bail out their shorts? The hypocrisy is stunning.

mike00632 6y ago
"Over leveraged" typically means you traded too much on credit in proportion to how much collateral you have, not that the trade is risky. A very large short position is reasonable for a company that is likely to go out of business.
- shakezula 6y ago
  I understand what over leveraged means. This was /also/ an incredibly risky short to start. I’m not convinced that GameStop was ready to go out of business. Struggling, sure, pandemic and all that, and that would justify a put position, but the market also reacted exactly how it’s allowed to and called out a short positions bluff.