4 ms·

Could someone explain the games stop draw? Apple has over 500 stores while gamestop has over 5500.

Trasmatta 6y ago
There is no draw, it's a meme stock that's had a cult form around it.
andrewmunsell 6y ago
I'm pretty sure most people would argue that it has nothing to do with market fundamentals or the valuation of Gamestop as a company. There's a mixture of wanting to stick it to hedge funds (based on the idea that a short squeeze could happen), power from it being a meme, and other social factors. You'll often see optimism on Reddit about changes that Gamestop is making to their stores or business model, but I think that's really the minority here. Disclaimer: I have previously bought/sold GME purely out of personal interest for the phenomenon (and have no position in it now, nor do I have a plan to buy any more), but this is not financial advice.
ohashi 6y ago
The Reddit belief is short squeeze. That there are fewer shares available than people (hedge funds) have shorted. Thus if price goes up, they have to buy to cover, pushing price up even more, and the cycle continues. Until it bursts at some point (not really talked about). It doesn't have a lot to do with financial future of GameStop. It's overvalued as a company almost surely. But it's not a scam company, it's not going bankrupt, but the draw is a certain class of investor bet way too heavily against it that it created an opportunity to take advantage of, GameStop just happens to be the field the game is being played on.
- vkou 6y ago
  > The Reddit belief is short squeeze. That there are fewer shares available than people (hedge funds) have shorted. Thus if price goes up, they have to buy to cover, pushing price up even more, and the cycle continues. Until it bursts at some point (not really talked about). The problem is that Reddit is full of morons, who don't understand a single thing about short sales. When a stock is 150% shorted, there exist 250% shares of stock. That's because for every short sale, a new long position is created. It is impossible for there to be more short positions, than there are long positions. [1] Now, if[2], say 150% of the shares are held by buy-and-forget investors, who won't sell, regardless of where the price goes, a short squeeze is possible (Because there are fewer shares being actively traded, than there are short positions open.) The thing is, when GME goes to some ridiculous valuation like $300, some of those buy-and-forget investors may be inclined to take their money, and sell. Any half-actively managed fund would be crazy not to. Are short sellers getting margin-called applying upwards price pressure? Yes. Is that the only source of upwards price pressure? No, there's also a mountain of people with either FOMO, or the hope to unload the stock to a bigger fool. This is rational, in the same sense that investing early into a bubble, or a pyramid scheme is rational. [1] Unless you do a naked short sell[3]. Reddit screams about illegal naked short selling, without offering a shred of proof, because it doesn't understand the concept mentioned in the paragraph above. [2] Reddit also has no proof that this is the case, it's just a tribe of apes screaming 'hodl' at eachother. [3] The only people who naked short sell are market makers, who are incredibly risk averse, and balance their positions out on a regular basis. Hedge funds aren't market makers, and aren't allowed to naked short sell.
  - rualca 6y ago
    > Now, if[2], say 150% of the shares are held by buy-and-forget investors, who won't sell, regardless of where the price goes, a short squeeze is possible That's precisely the whole premise of gamestop's rally. It's weird why you accuse those who state the same as you as being "morons" just for pointing precisely the same fact that you've just pointed out. > The thing is, when GME goes to some ridiculous valuation like $300, some of those buy-and-forget investors may be inclined to take their money, and sell. Think for a second: Don't you think that it might just be because of that why "hold" and "diamond hands" is repeated ad-nauseum by those who rally behind the short squeeze? Perhaps those "morons" might have a point, right?
    - rspeele 6y ago
      It's the prisoner's dilemma playing out with millions of participants. Sure, if everybody holds, there's nobody to buy shares from. But it just takes some defectors to sell and take the sure profits leaving the rest as bag-holders. And whether you collude or defect, you'd still tell others to keep holding, we're all taking down the hedgies together, whatever.
      - rualca 6y ago
        > Sure, if everybody holds, there's nobody to buy shares from. Not really. For your belief to have any basis, you'd need to believe that the whole world was comprised of either WSB-blend of redditors or hedge fund shorters, which is a highly silly assumption. > But it just takes some defectors to sell You're somehow assuming that a hand-full of single- or double-digit stock portfolio retail investors are able to manipulate the stock price by selling their residual position.
        rspeele 6y ago
        I think we're talking past each other. I'm saying that the reddit-power short squeeze to-the-moon fantasy is a fantasy because the market is composed of many participants and lots of them will choose to sell at a price that's profitable, but not astronomical.
mywittyname 6y ago
It's a battle with the people with an financial incentive/bet that the stock will go down. These people have essentially borrowed shares and sold them on the market (short sale), and are waiting at some time in the future to buy them back. The idea is they will buy the stock back at a much lower price than they originally sold them for. The people holding the IOUs for gamestop stock are paid regular interest payments. These payments are relative to the price of gamestop. The higher the stock price goes, the higher the interest payments are. When the stock skyrockets like this, a positive feedback loop is generated (called a short-squeeze), people want to buy back shares to stop their interest payments on the IOUs. And if there aren't enough shares available, the price spikes. Eventually, the market cools off and the price plummets back to earth.

There is no draw, it's a meme stock that's had a cult form around it.

I'm pretty sure most people would argue that it has nothing to do with market fundamentals or the valuation of Gamestop as a company. There's a mixture of wanting to stick it to hedge funds (based on the idea that a short squeeze could happen), power from it being a meme, and other social factors. You'll often see optimism on Reddit about changes that Gamestop is making to their stores or business model, but I think that's really the minority here. Disclaimer: I have previously bought/sold GME purely out of personal interest for the phenomenon (and have no position in it now, nor do I have a plan to buy any more), but this is not financial advice.

ohashi 6y ago

The Reddit belief is short squeeze. That there are fewer shares available than people (hedge funds) have shorted. Thus if price goes up, they have to buy to cover, pushing price up even more, and the cycle continues. Until it bursts at some point (not really talked about). It doesn't have a lot to do with financial future of GameStop. It's overvalued as a company almost surely. But it's not a scam company, it's not going bankrupt, but the draw is a certain class of investor bet way too heavily against it that it created an opportunity to take advantage of, GameStop just happens to be the field the game is being played on.

vkou 6y ago
> The Reddit belief is short squeeze. That there are fewer shares available than people (hedge funds) have shorted. Thus if price goes up, they have to buy to cover, pushing price up even more, and the cycle continues. Until it bursts at some point (not really talked about). The problem is that Reddit is full of morons, who don't understand a single thing about short sales. When a stock is 150% shorted, there exist 250% shares of stock. That's because for every short sale, a new long position is created. It is impossible for there to be more short positions, than there are long positions. [1] Now, if[2], say 150% of the shares are held by buy-and-forget investors, who won't sell, regardless of where the price goes, a short squeeze is possible (Because there are fewer shares being actively traded, than there are short positions open.) The thing is, when GME goes to some ridiculous valuation like $300, some of those buy-and-forget investors may be inclined to take their money, and sell. Any half-actively managed fund would be crazy not to. Are short sellers getting margin-called applying upwards price pressure? Yes. Is that the only source of upwards price pressure? No, there's also a mountain of people with either FOMO, or the hope to unload the stock to a bigger fool. This is rational, in the same sense that investing early into a bubble, or a pyramid scheme is rational. [1] Unless you do a naked short sell[3]. Reddit screams about illegal naked short selling, without offering a shred of proof, because it doesn't understand the concept mentioned in the paragraph above. [2] Reddit also has no proof that this is the case, it's just a tribe of apes screaming 'hodl' at eachother. [3] The only people who naked short sell are market makers, who are incredibly risk averse, and balance their positions out on a regular basis. Hedge funds aren't market makers, and aren't allowed to naked short sell.
- rualca 6y ago
  > Now, if[2], say 150% of the shares are held by buy-and-forget investors, who won't sell, regardless of where the price goes, a short squeeze is possible That's precisely the whole premise of gamestop's rally. It's weird why you accuse those who state the same as you as being "morons" just for pointing precisely the same fact that you've just pointed out. > The thing is, when GME goes to some ridiculous valuation like $300, some of those buy-and-forget investors may be inclined to take their money, and sell. Think for a second: Don't you think that it might just be because of that why "hold" and "diamond hands" is repeated ad-nauseum by those who rally behind the short squeeze? Perhaps those "morons" might have a point, right?
  - rspeele 6y ago
    It's the prisoner's dilemma playing out with millions of participants. Sure, if everybody holds, there's nobody to buy shares from. But it just takes some defectors to sell and take the sure profits leaving the rest as bag-holders. And whether you collude or defect, you'd still tell others to keep holding, we're all taking down the hedgies together, whatever.
    - rualca 6y ago
      > Sure, if everybody holds, there's nobody to buy shares from. Not really. For your belief to have any basis, you'd need to believe that the whole world was comprised of either WSB-blend of redditors or hedge fund shorters, which is a highly silly assumption. > But it just takes some defectors to sell You're somehow assuming that a hand-full of single- or double-digit stock portfolio retail investors are able to manipulate the stock price by selling their residual position.
      - rspeele 6y ago
        I think we're talking past each other. I'm saying that the reddit-power short squeeze to-the-moon fantasy is a fantasy because the market is composed of many participants and lots of them will choose to sell at a price that's profitable, but not astronomical.

mywittyname 6y ago

It's a battle with the people with an financial incentive/bet that the stock will go down. These people have essentially borrowed shares and sold them on the market (short sale), and are waiting at some time in the future to buy them back. The idea is they will buy the stock back at a much lower price than they originally sold them for. The people holding the IOUs for gamestop stock are paid regular interest payments. These payments are relative to the price of gamestop. The higher the stock price goes, the higher the interest payments are. When the stock skyrockets like this, a positive feedback loop is generated (called a short-squeeze), people want to buy back shares to stop their interest payments on the IOUs. And if there aren't enough shares available, the price spikes. Eventually, the market cools off and the price plummets back to earth.