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Right. My biggest concern with these plays, at this point, is that they're not taking into account the possibility of bankruptcy. There's a ton of "they have to

by 015a 6y ago

Right. My biggest concern with these plays, at this point, is that they're not taking into account the possibility of bankruptcy. There's a ton of "they have to buy it, if we hold all the shares then it'll go to the moon, 1k, 2k, 4k". (1) The sheer variety of financial vehicles available to professional investors is staggering, and while the initial DD was really good, we probably missed something at this point, and (2) if all else fails, and a fund can't buy back the 50,000 shares it owes some brokerage, that fund doesn't have to buy them back. They can just declare bankruptcy. I think these realizations are why much of the r/WSB discourse over the past two days has shifted from "we're going to be millionaires" to "i'm just in it at this point to stick it to the man". That's fair, and some people did legitimately become very rich off of this, but at this point, more funds are playing with WSB than against them. Funds are not some conglomerate that moves together; they hate each other as much as the public hates all of them. Short interest in the past week has remained pretty steady. Some people view this as "the funds are doubling down, get 'em while they're bleeding". No, actually; they know what's most likely to happen, which is, everyone is going to forget about this in about three days. Gamestop's stock isn't good. These new shorts are not priced like "I think its going to go below $7"; they're priced like "I think its going to go below $200".

jojobas 6y ago
That's a great part of their sentiment - "I may not profit that much, but these fat cats will suffer". Also, bankruptcy still means a fair share in the assets of the bankrupted.
- PeterisP 6y ago
  Well, the other fat cats will have a claim on a fair share in the assets of the bankrupted; the WSB investors would not have any claim whatsoever on the assets of a bankrupt hedge fund who shorted the same stock - they will have the stocks they bought, the fund does not owe them anything, the broken promise to buy and return loaned shares was to some broker, not to any retail investors.
  - jojobas 6y ago
    I believe anyone's shares can be lent out by their brokerage. That might differ broker by broker but that's the general idea, there's no dedicated "other side of the short" as such.
    - joncrane 6y ago
      When I signed up for IB I had to check a box that permits IB to loan out my shares for a small fee. I'm not sure if a broker can loan out a client's shares without the client's approval. It may be fine print in the TOS, though.
lifeformed 6y ago
I thought bankruptcy would still mean the brokers are on the line for the money?
- toomuchtodo 6y ago
  They are. That’s what collateral, broker risk management, and (if the broker fails) DTCC is for, to derisk counterparty failure risk. Someone is paying up.
  - fumar 6y ago
    This is as I understood it. There is a lot of misinformation from folks who believe to understand the entire situation from all players' perspective. I am not able to comprehend the situation well enough. If anyone has seen a good non-biased write up on what has happened so far and what may happen, I would love to see it.
    - kmonad 6y ago
      I feel that I learnt something from this twitter thread. https://twitter.com/KralcTrebor/status/1354952686165225478 https://twitter.com/KralcTrebor/status/1354952686165225478
      - amluto 6y ago
        That’s a good thread. Here’s the part that makes no sense to me: why can’t Robinhood use customer funds for their deposit? Imagine a degenerate case: all but one client make no trades at all. One client has $100k deposited and buys $100k worth of GME. Prior to settlement, GME drops by 50%. That client is (effectively) out the entire $100k, and they are owed $50k worth of GME. Robinhood needs to post somewhere between $50k and $100k of collateral to the clearinghouse. This all seems entirely reasonable with one giant of exception: apparently Robinhood may not draw on the client’s deposit for this. Never mind that, at settlement, the client will be debited the entire $100k. Somehow Robinhood is expected to temporarily come up with an additional $50k-$100k for a two day period. This seems bizarre to me.
nursur2011 6y ago
>I think these realizations are why much of the r/WSB discourse over the past two days has shifted from "we're going to be millionaires" to "i'm just in it at this point to stick it to the man". I think that's more the activist crowd that has joined over the past week. I have a hard time believing the original r/WSB people care more about making a political statement instead of money.
- xmprt 6y ago
  I know quite a few people who still think there's money to be made by getting in at $300+ I don't know if they're right or wrong, but the fact remains there are people who are getting in to both make money as well as stick it to the man.
rualca 6y ago
> My biggest concern with these plays, at this point, is that they're not taking into account the possibility of bankruptcy. Whose bankruptcy? The WSB crowd are very vocal in their goals of bankrupting hedge funds who have a lot riding on forcing gamespot's stock price to plummet.
- 015a 6y ago
  The funds. There's an ocean of difference between "we finished the year down 98% but we met all of our obligations" and "we finished the year down 100%, and we also failed to meet our obligations". Those obligations include the repurchase and repayment of short-sold stocks sold by the brokerage. WSB wants a short squeeze. They got that. But, their theory is that it isn't over, and if they get the 10x+ returns in the coming weeks (I don't think they will, but lets say they do), then these funds are potentially looking at commitments that approach their AUM, and a nasty margin call. That's a real recipe for shutting down, and if that happens, there is no more short to squeeze. Everyone loses.
  - deleted 6y ago
    [deleted]
  - rualca 6y ago
    > That's a real recipe for shutting down, and if that happens, there is no more short to squeeze. Everyone loses. It seems you didn't understood that for the WSB crowd the definition of winning is getting these funds to shut down, regardless of their personal losses. This is no longer about money. This is a protest against a rigged system.
    - bostik 6y ago
      In a sibling thread someone already coined the term "spite investing". I'm personally into boring index and ETF vehicles, but I am stocking up on something right now: popcorn.
derptron 6y ago
>more funds are playing with WSB than against them. sheer conjecture
Rapzid 6y ago
> if all else fails, and a fund can't buy back the 50,000 shares it owes some brokerage, that fund doesn't have to buy them back. They can just declare bankruptcy. If that's true wouldn't it incentivize the brokerages to help the funds weather the storm? Everyone can just wait it out till the stock crashes back and instead of sticking it to the man WSB just emptied their pockets into the mans accounts..
- northern-lights 6y ago
  They may not do that because they are more risk averse than WSB. WSB can distribute losses over individuals and can tolerate, hedge funds probably can't. And it goes without saying - WSB can remain retarded longer.

by 015a 6y ago

jojobas 6y ago

That's a great part of their sentiment - "I may not profit that much, but these fat cats will suffer". Also, bankruptcy still means a fair share in the assets of the bankrupted.

PeterisP 6y ago
Well, the other fat cats will have a claim on a fair share in the assets of the bankrupted; the WSB investors would not have any claim whatsoever on the assets of a bankrupt hedge fund who shorted the same stock - they will have the stocks they bought, the fund does not owe them anything, the broken promise to buy and return loaned shares was to some broker, not to any retail investors.
- jojobas 6y ago
  I believe anyone's shares can be lent out by their brokerage. That might differ broker by broker but that's the general idea, there's no dedicated "other side of the short" as such.
  - joncrane 6y ago
    When I signed up for IB I had to check a box that permits IB to loan out my shares for a small fee. I'm not sure if a broker can loan out a client's shares without the client's approval. It may be fine print in the TOS, though.

lifeformed 6y ago

I thought bankruptcy would still mean the brokers are on the line for the money?

toomuchtodo 6y ago
They are. That’s what collateral, broker risk management, and (if the broker fails) DTCC is for, to derisk counterparty failure risk. Someone is paying up.
- fumar 6y ago
  This is as I understood it. There is a lot of misinformation from folks who believe to understand the entire situation from all players' perspective. I am not able to comprehend the situation well enough. If anyone has seen a good non-biased write up on what has happened so far and what may happen, I would love to see it.
  - kmonad 6y ago
    I feel that I learnt something from this twitter thread. https://twitter.com/KralcTrebor/status/1354952686165225478 https://twitter.com/KralcTrebor/status/1354952686165225478
    - amluto 6y ago
      That’s a good thread. Here’s the part that makes no sense to me: why can’t Robinhood use customer funds for their deposit? Imagine a degenerate case: all but one client make no trades at all. One client has $100k deposited and buys $100k worth of GME. Prior to settlement, GME drops by 50%. That client is (effectively) out the entire $100k, and they are owed $50k worth of GME. Robinhood needs to post somewhere between $50k and $100k of collateral to the clearinghouse. This all seems entirely reasonable with one giant of exception: apparently Robinhood may not draw on the client’s deposit for this. Never mind that, at settlement, the client will be debited the entire $100k. Somehow Robinhood is expected to temporarily come up with an additional $50k-$100k for a two day period. This seems bizarre to me.

nursur2011 6y ago

>I think these realizations are why much of the r/WSB discourse over the past two days has shifted from "we're going to be millionaires" to "i'm just in it at this point to stick it to the man". I think that's more the activist crowd that has joined over the past week. I have a hard time believing the original r/WSB people care more about making a political statement instead of money.

xmprt 6y ago
I know quite a few people who still think there's money to be made by getting in at $300+ I don't know if they're right or wrong, but the fact remains there are people who are getting in to both make money as well as stick it to the man.

rualca 6y ago

> My biggest concern with these plays, at this point, is that they're not taking into account the possibility of bankruptcy. Whose bankruptcy? The WSB crowd are very vocal in their goals of bankrupting hedge funds who have a lot riding on forcing gamespot's stock price to plummet.

015a 6y ago
The funds. There's an ocean of difference between "we finished the year down 98% but we met all of our obligations" and "we finished the year down 100%, and we also failed to meet our obligations". Those obligations include the repurchase and repayment of short-sold stocks sold by the brokerage. WSB wants a short squeeze. They got that. But, their theory is that it isn't over, and if they get the 10x+ returns in the coming weeks (I don't think they will, but lets say they do), then these funds are potentially looking at commitments that approach their AUM, and a nasty margin call. That's a real recipe for shutting down, and if that happens, there is no more short to squeeze. Everyone loses.
- deleted 6y ago
  [deleted]
- rualca 6y ago
  > That's a real recipe for shutting down, and if that happens, there is no more short to squeeze. Everyone loses. It seems you didn't understood that for the WSB crowd the definition of winning is getting these funds to shut down, regardless of their personal losses. This is no longer about money. This is a protest against a rigged system.
  - bostik 6y ago
    In a sibling thread someone already coined the term "spite investing". I'm personally into boring index and ETF vehicles, but I am stocking up on something right now: popcorn.

derptron 6y ago

>more funds are playing with WSB than against them. sheer conjecture

Rapzid 6y ago

> if all else fails, and a fund can't buy back the 50,000 shares it owes some brokerage, that fund doesn't have to buy them back. They can just declare bankruptcy. If that's true wouldn't it incentivize the brokerages to help the funds weather the storm? Everyone can just wait it out till the stock crashes back and instead of sticking it to the man WSB just emptied their pockets into the mans accounts..

northern-lights 6y ago
They may not do that because they are more risk averse than WSB. WSB can distribute losses over individuals and can tolerate, hedge funds probably can't. And it goes without saying - WSB can remain retarded longer.