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Yes. If you read what the ultimate intent of the /r/wallstreetbets crowd is, they're not just trying to exercise the same right to make money off of the financ

Yes. If you read what the ultimate intent of the /r/wallstreetbets crowd is, they're not just trying to exercise the same right to make money off of the financial system that billionaires have. A year ago, the person that started this detected a situation where GME was a company that didn't have long term prospects, wasn't losing money, but was still shorted to 140% of it's value. It's not supposed to be possible to go over 100% any more since 2008, by the way. Because of the shorting, he deduced that hedge funds and other influential people in the financial system were planning to encourage GME to go bankrupt, thus getting their short shares forgiven, because a bankrupt company is written off as a loss by the actual share owner. So the hedge funds' plan was to short shares at some price as much as they could get away with, then make the shares worthless by encouraging bankruptcy. Since the shares would then be written off, they would pocket all the money they took from selling the shares they borrowed to short. Nice racket. What WSB did is make the price go in the opposite direction, which is important for a lot of reasons, but one huge one is that the risk of shorting is proportional to the reward. If the price of a shorted stock goes up, then the borrower (person doing the short) still has to return it to the owner. No matter how high the price goes. So they realized if they drive the price WAY up, then the people who were doing the 140% shorts on a company they planned to drive out of business would get screwed by their own system. Some of the folks on WSB are making money and lots of it, but many of them just want to see the whole unfair system burn. By exploiting this weakness, they're trying to force the government to reform the whole finance industry.

djbebs 6y ago
Thats not true at all. Its perfectly possible and legal to short beyond 100%
- Accujack 6y ago
  The practice I'm referring to is "naked shorting" which has been illegal since 2008 in the US.
  - ZephyrBlu 6y ago
    See this comment for why you can have >100% short interest without naked shorting: https://news.ycombinator.com/item?id=25991013 https://news.ycombinator.com/item?id=25991013
  - kcg 6y ago
    Except you're completely conflating terms and numbers here. A stock can have over 100% short interest with no naked shorting occurring. >100% short interest DOES NOT imply that there is naked shorting.
    - Accujack 6y ago
      It doesn't guarantee that it's occurring, but it's strong indicator that something sketchy is happening. In this case, the important point is that a hedge fund with a 140% short position is more vulnerable to loss than a hedge fund with a 100% short position.
      - ac29 6y ago
        > In this case, the important point is that a hedge fund with a 140% short position is more vulnerable to loss than a hedge fund with a 100% short position. Sure, but only in the sense that a fund is also more vulnerable to loss at 80% short than 40% short. Nothing magic happens between 99% and 101% short.
- tedunangst 6y ago
  It's amazing how we're on day 10 of this adventure and people still show up like this is the first and only thread.
Armisael16 6y ago
>It's not supposed to be possible to go over 100% any more since 2008, by the way. This is fundamentally untrue. Abusive naked shorting with the goal of driving down prices is illegal. >100% short interest doesn’t require naked shorting at all. If person A borrows a stock from person B then sells it to person C, they can borrow the stock back from person C and sell it again. No naked short involved.
- dpiers 6y ago
  Call it a scantily-clad short then. A share that is already lent out to a short seller should not be eligible to be lent out again for the same reason I can't get two mortgages to buy the same house - the underlying collateral would be owed to multiple parties.
  - ZephyrBlu 6y ago
    This is ok because all instances of borrowing the share don't need to be settled simultaneously.
  - 314 6y ago
    This is not true. Party A has a contract that party B owes them a share - not the share that they originally loaned. The whole idea is for party B to buy a share later to balance the trade. A better analogy to understand why short interest can rise above 100% is fractional reserve lending and the effect that it has on money supply.
  - rokobobo 6y ago
    A share is a share is a share. You can’t tell which one was loaned out and which one wasn’t. And it’s not used as collateral, money is posted as collateral instead.
- ZephyrBlu 6y ago
  To clarify, this is not considered a naked short because in this situation there is a share that is known to exist. Re-borrowing the same share does not make it a naked short.
jonshariat 6y ago
Thank you for this simple explanation. I've read a lot on this the past week or so and it wasn't clear what was going on other than the surface level info about shorting.
SpicyLemonZest 6y ago
I think you need to seriously consider the possibility that the people spreading this narrative are doing so dishonestly in order to pump the stock. Short interest is now far below 100% (https://www.bloomberg.com/news/articles/2021-02-01/gamestop-short-interest-plummets-in-a-sign-traders-are-covering https://www.bloomberg.com/news/articles/2021-02-01/gamestop-...), yet /r/wallstreetbets is still full of hold memes rather than victory speeches.
- SkyPuncher 6y ago
  > Short interest is now far below 100% With all due respect, this is still speculative. We won't know the exact numbers for another week.
  - SpicyLemonZest 6y ago
    The exact number definitely isn't known, given that the Bloomberg article includes two estimates of 39% and 50%. I'm not familiar with how these numbers are generated; is it plausible that the real number could be close to 100% even with such low estimates?
- Accujack 6y ago
  Also the possibility that people spreading the narrative that people are dishonestly spreading narratives to pump the stock. My summary above is rough, and it's based on most of the information I've read about the situation. As always, there are voices on both sides for every single fact. Time will tell how this all falls out, but right now there are a lot of finance firms grinding their teeth, which is a victory in itself. Also, apparently Gamestop itself used the gain in stock price to settle some debts by being able to issue more stock to meet demand at the higher price, thus getting a cash infusion.
  - kcg 6y ago
    >Also, apparently Gamestop itself used the gain in stock price to settle some debts by being able to issue more stock to meet demand at the higher price, thus getting a cash infusion. False -- if you're going to spread information about financial nuances across this thread, you should look it up first. Go read the SEC filings for GME (SEC EDGAR is your friend), there has been no additional issuance since GME took off. Nor would it be realistically possible given the volatility.
rland 6y ago
That's the myth, and it's been pretty effectively sold to redditors. The reality is that there are hedge funds who profit on both sides of the trade. There were a few shorts who did lose a lot of money, but that is part of the risk of shorting stock and it's kind of incredible that people think that those hedge funds believed that their trade was risk free. I think now, the cat is out of the bag, and astroturfing a pump-and-dump on reddit/twitter/discord is going to be a pretty lucrative thing now for some entities, at least until there's some kind of regulatory action against it. Comments like this: "I'm trying to jump in but can you eli5 what a market order is please?" get translated to "Come eat my lunch please! I would like to give away my money." They want to see the whole unfair system burn, which I totally get, but this is not how you make that happen. Regular people do have a lot of power over our financial system, but when they try to exercise it like this... it's difficult to watch. So many people are going to eat shit on this. They'll be left holding the bag and wondering why everyone else on Wall Street got so rich off their backs. If you're reading this and you think you might be sticking it to the hedge funds by buying in: there are plenty -- PLENTY -- of hedge funds who are willing to sell you GME at $350 per share.

djbebs 6y ago

Thats not true at all. Its perfectly possible and legal to short beyond 100%

Accujack 6y ago
The practice I'm referring to is "naked shorting" which has been illegal since 2008 in the US.
- ZephyrBlu 6y ago
  See this comment for why you can have >100% short interest without naked shorting: https://news.ycombinator.com/item?id=25991013 https://news.ycombinator.com/item?id=25991013
- kcg 6y ago
  Except you're completely conflating terms and numbers here. A stock can have over 100% short interest with no naked shorting occurring. >100% short interest DOES NOT imply that there is naked shorting.
  - Accujack 6y ago
    It doesn't guarantee that it's occurring, but it's strong indicator that something sketchy is happening. In this case, the important point is that a hedge fund with a 140% short position is more vulnerable to loss than a hedge fund with a 100% short position.
    - ac29 6y ago
      > In this case, the important point is that a hedge fund with a 140% short position is more vulnerable to loss than a hedge fund with a 100% short position. Sure, but only in the sense that a fund is also more vulnerable to loss at 80% short than 40% short. Nothing magic happens between 99% and 101% short.
tedunangst 6y ago
It's amazing how we're on day 10 of this adventure and people still show up like this is the first and only thread.

Armisael16 6y ago

>It's not supposed to be possible to go over 100% any more since 2008, by the way. This is fundamentally untrue. Abusive naked shorting with the goal of driving down prices is illegal. >100% short interest doesn’t require naked shorting at all. If person A borrows a stock from person B then sells it to person C, they can borrow the stock back from person C and sell it again. No naked short involved.

dpiers 6y ago
Call it a scantily-clad short then. A share that is already lent out to a short seller should not be eligible to be lent out again for the same reason I can't get two mortgages to buy the same house - the underlying collateral would be owed to multiple parties.
- ZephyrBlu 6y ago
  This is ok because all instances of borrowing the share don't need to be settled simultaneously.
- 314 6y ago
  This is not true. Party A has a contract that party B owes them a share - not the share that they originally loaned. The whole idea is for party B to buy a share later to balance the trade. A better analogy to understand why short interest can rise above 100% is fractional reserve lending and the effect that it has on money supply.
- rokobobo 6y ago
  A share is a share is a share. You can’t tell which one was loaned out and which one wasn’t. And it’s not used as collateral, money is posted as collateral instead.
ZephyrBlu 6y ago
To clarify, this is not considered a naked short because in this situation there is a share that is known to exist. Re-borrowing the same share does not make it a naked short.

jonshariat 6y ago

Thank you for this simple explanation. I've read a lot on this the past week or so and it wasn't clear what was going on other than the surface level info about shorting.

SpicyLemonZest 6y ago

I think you need to seriously consider the possibility that the people spreading this narrative are doing so dishonestly in order to pump the stock. Short interest is now far below 100% (https://www.bloomberg.com/news/articles/2021-02-01/gamestop-short-interest-plummets-in-a-sign-traders-are-covering https://www.bloomberg.com/news/articles/2021-02-01/gamestop-...), yet /r/wallstreetbets is still full of hold memes rather than victory speeches.

SkyPuncher 6y ago
> Short interest is now far below 100% With all due respect, this is still speculative. We won't know the exact numbers for another week.
- SpicyLemonZest 6y ago
  The exact number definitely isn't known, given that the Bloomberg article includes two estimates of 39% and 50%. I'm not familiar with how these numbers are generated; is it plausible that the real number could be close to 100% even with such low estimates?
Accujack 6y ago
Also the possibility that people spreading the narrative that people are dishonestly spreading narratives to pump the stock. My summary above is rough, and it's based on most of the information I've read about the situation. As always, there are voices on both sides for every single fact. Time will tell how this all falls out, but right now there are a lot of finance firms grinding their teeth, which is a victory in itself. Also, apparently Gamestop itself used the gain in stock price to settle some debts by being able to issue more stock to meet demand at the higher price, thus getting a cash infusion.
- kcg 6y ago
  >Also, apparently Gamestop itself used the gain in stock price to settle some debts by being able to issue more stock to meet demand at the higher price, thus getting a cash infusion. False -- if you're going to spread information about financial nuances across this thread, you should look it up first. Go read the SEC filings for GME (SEC EDGAR is your friend), there has been no additional issuance since GME took off. Nor would it be realistically possible given the volatility.

rland 6y ago

That's the myth, and it's been pretty effectively sold to redditors. The reality is that there are hedge funds who profit on both sides of the trade. There were a few shorts who did lose a lot of money, but that is part of the risk of shorting stock and it's kind of incredible that people think that those hedge funds believed that their trade was risk free. I think now, the cat is out of the bag, and astroturfing a pump-and-dump on reddit/twitter/discord is going to be a pretty lucrative thing now for some entities, at least until there's some kind of regulatory action against it. Comments like this: "I'm trying to jump in but can you eli5 what a market order is please?" get translated to "Come eat my lunch please! I would like to give away my money." They want to see the whole unfair system burn, which I totally get, but this is not how you make that happen. Regular people do have a lot of power over our financial system, but when they try to exercise it like this... it's difficult to watch. So many people are going to eat shit on this. They'll be left holding the bag and wondering why everyone else on Wall Street got so rich off their backs. If you're reading this and you think you might be sticking it to the hedge funds by buying in: there are plenty -- PLENTY -- of hedge funds who are willing to sell you GME at $350 per share.