8 ms·

I was following "Roaring Kittys" Youtube Channel when he had less than 400 subscribers. This was never intended to be a pump and dump, he genuinely made a case

by clktmr 5y ago

I was following "Roaring Kittys" Youtube Channel when he had less than 400 subscribers. This was never intended to be a pump and dump, he genuinely made a case for a better valuation. The mania and hype started right after the short squeeze in january and I a agree that the community that built around it is mostly a shitshow. However many of the original investors are still invested believing in a business turn-around lead by Ryan Cohen.

ricardobeat 5y ago
The stock already sits at 600% valuation, what kind of turnaround will justify a multiple of that?
- ChuckNorris89 5y ago
  A lot of people got in when the stock was near the peak so they were left holding the bag. They're holding, hoping for a potential return on their investment as selling now would be at a loss.
- clktmr 5y ago
  What exactly is a "600% valuation"? In 2020 Gamestop was valued at a level that implied bankruptcy within two years.
  - ricardobeat 5y ago
    Their financials still imply eventual bankruptcy at the moment, even after the massive windfall from stock appreciation.
- SilasX 5y ago
  I can't speak to the claims about potential profitability of GameStop's business ventures, but one theory endorsed by a lot of the /r/wallstreetbets and /r/SuperStonk redditors is that hedge funds still have significant undisclosed shorts and we have yet to see the "mother of all short squeezes" (MoASS), in which case the stock price can be well in excess of what is justified by future profitability. Related to this theory, a lot of them believe the ease of closing short positions is facilitated by shady phantom shares and are trying to stamp that out by directly registering shares with the broker Computershare. Disclaimer: I own GME stock.
- Anadorr 5y ago
  600% from what? Price discovery is broken when large market participants and market makers have access to mechanisms that enable unlimited shorting. Current price is, in part, driven by asymmetrical risk/reward - there's a small potential loss (size of one's position in GME) and subjectively high chance of having a real stock squeeze (and having a 10/100/1000x reward) assuming that original 120%+ short interest was not closed and is still held in the form of various derivatives. The assumption hasn't been disproved so far, partly because current regulatory environment is very lax on reporting (which makes it very hard to disprove the thesis using public data) and partly due to other indicators (like retail owning over 10% of float as of last earnings report).
  - NovemberWhiskey 5y ago
    >market makers have access to mechanisms that enable unlimited shorting. Uhh, what?
    - bigram 5y ago
      Market makers are allowed to be temporarily naked short because it's required for them to do the job they're supposed to do - provide liquidity. A market maker can sell short if they don't have any stock because they will almost certainly be buying it soon after. There's no evidence that any market makers are abusing this privilege with GameStop.
      - NovemberWhiskey 5y ago
        Yeah; it's not exactly what I'd called "unlimited shorting"; all of the pre-borrow and closeout requirements from Regulation SHO apply ... plus, as you say, the market maker exception is specifically there to stabilize markets by providing liquidity in the face of sudden rushes to buy. I guess one man's price stabilization is another man's market manipulation.
        revel 5y ago
        This poster knows what they're talking about. The market making exception is there to prevent liquidity completely evaporating as it did during the flash crash. It's not there to encourage them to bend the rules -- it's to compel them to trade when it might be unprofitable. Every trade has to be marked correctly, whether it's short with a physical locate or short on a riskless principal basis. Equity swaps trade and are marked as riskless principal trades (ie. they're fully hedged positions and the short position is the market maker's aggregate short position). That information gets aggregated at client level and reported to regulators. After Dodd Frank equity swaps and rehypo became even more heavily restricted. Swaps go through a clearing house and rehypothication was basically dead the last time I worked in the industry (though that might have changed). I'm 99% sure that the speculation about the "elites" and their sinister role in GME's trading activity is simply caused by booking errors and/or aggregation mistakes.
oh_sigh 5y ago
He genuinely made a case for a better valuation, but the case was on its face ridiculous. Correct me if I'm wrong, but wasn't his idea that there is some big digital play for gamestop? Which...sure..maybe with huge investments, but they'd be going up against the stores already built into the major consoles and mobile devices, and then the number of major game stores available for a PC. I'll wager 1 GME: Gamestop will never be a major digital player and DFV's thesis was wrong.
- clktmr 5y ago
  No, the original thesis was solely to survive another console cycle. As I said elsewhere, the 2020 valuation implied Gamestop defaulting on it's debt in 2021, because most analysts didn't even expect gen5 consoles to have an optical drive. It all blew through the roof when Ryan Cohen stepped in and speculation on Gamestop entering new markets started.
  - reducesuffering 5y ago
    The 2020 valuation implied that it's very likely Gamestop won't ever make much profit again, whether it bankrupts next year or 20, if it never makes profit the stock is worth $0. And as we've seen through the cycle, this was actually true. Gamestop hasn't made an annual profit in over 3 years. With this "undervalued" gaming cycle you talk about, they made $80m in a quarter which they promptly blew in losses the next quarter and are increasingly losing money, to the tune of $100m/quarter. Instead of a typical small cap value company that is making 15 P/E, Gamestop is doing the opposite and losing that much money, -15 P/E, in a dying, declining growth business. Feel free to buy shares for $100, where every year they give you $94 value back, to sell physical copies of video games... Those are the actual fundamentals. Gamestop stock value represents a lottery ticket that they will ever make some money again. It's not worth much.
    - clktmr 5y ago
      > whether it bankrupts next year or 20, if it never makes profit the stock is worth $0. A business is at least worth it's liquidation value at any time. And $GME was trading near liquidation value. Feel free to read up on Cigar Butt Investing if interested.

by clktmr 5y ago

ricardobeat 5y ago

The stock already sits at 600% valuation, what kind of turnaround will justify a multiple of that?

ChuckNorris89 5y ago
A lot of people got in when the stock was near the peak so they were left holding the bag. They're holding, hoping for a potential return on their investment as selling now would be at a loss.
clktmr 5y ago
What exactly is a "600% valuation"? In 2020 Gamestop was valued at a level that implied bankruptcy within two years.
- ricardobeat 5y ago
  Their financials still imply eventual bankruptcy at the moment, even after the massive windfall from stock appreciation.
SilasX 5y ago
I can't speak to the claims about potential profitability of GameStop's business ventures, but one theory endorsed by a lot of the /r/wallstreetbets and /r/SuperStonk redditors is that hedge funds still have significant undisclosed shorts and we have yet to see the "mother of all short squeezes" (MoASS), in which case the stock price can be well in excess of what is justified by future profitability. Related to this theory, a lot of them believe the ease of closing short positions is facilitated by shady phantom shares and are trying to stamp that out by directly registering shares with the broker Computershare. Disclaimer: I own GME stock.
Anadorr 5y ago
600% from what? Price discovery is broken when large market participants and market makers have access to mechanisms that enable unlimited shorting. Current price is, in part, driven by asymmetrical risk/reward - there's a small potential loss (size of one's position in GME) and subjectively high chance of having a real stock squeeze (and having a 10/100/1000x reward) assuming that original 120%+ short interest was not closed and is still held in the form of various derivatives. The assumption hasn't been disproved so far, partly because current regulatory environment is very lax on reporting (which makes it very hard to disprove the thesis using public data) and partly due to other indicators (like retail owning over 10% of float as of last earnings report).
- NovemberWhiskey 5y ago
  >market makers have access to mechanisms that enable unlimited shorting. Uhh, what?
  - bigram 5y ago
    Market makers are allowed to be temporarily naked short because it's required for them to do the job they're supposed to do - provide liquidity. A market maker can sell short if they don't have any stock because they will almost certainly be buying it soon after. There's no evidence that any market makers are abusing this privilege with GameStop.
    - NovemberWhiskey 5y ago
      Yeah; it's not exactly what I'd called "unlimited shorting"; all of the pre-borrow and closeout requirements from Regulation SHO apply ... plus, as you say, the market maker exception is specifically there to stabilize markets by providing liquidity in the face of sudden rushes to buy. I guess one man's price stabilization is another man's market manipulation.
      - revel 5y ago
        This poster knows what they're talking about. The market making exception is there to prevent liquidity completely evaporating as it did during the flash crash. It's not there to encourage them to bend the rules -- it's to compel them to trade when it might be unprofitable. Every trade has to be marked correctly, whether it's short with a physical locate or short on a riskless principal basis. Equity swaps trade and are marked as riskless principal trades (ie. they're fully hedged positions and the short position is the market maker's aggregate short position). That information gets aggregated at client level and reported to regulators. After Dodd Frank equity swaps and rehypo became even more heavily restricted. Swaps go through a clearing house and rehypothication was basically dead the last time I worked in the industry (though that might have changed). I'm 99% sure that the speculation about the "elites" and their sinister role in GME's trading activity is simply caused by booking errors and/or aggregation mistakes.

oh_sigh 5y ago

He genuinely made a case for a better valuation, but the case was on its face ridiculous. Correct me if I'm wrong, but wasn't his idea that there is some big digital play for gamestop? Which...sure..maybe with huge investments, but they'd be going up against the stores already built into the major consoles and mobile devices, and then the number of major game stores available for a PC. I'll wager 1 GME: Gamestop will never be a major digital player and DFV's thesis was wrong.

clktmr 5y ago
No, the original thesis was solely to survive another console cycle. As I said elsewhere, the 2020 valuation implied Gamestop defaulting on it's debt in 2021, because most analysts didn't even expect gen5 consoles to have an optical drive. It all blew through the roof when Ryan Cohen stepped in and speculation on Gamestop entering new markets started.
- reducesuffering 5y ago
  The 2020 valuation implied that it's very likely Gamestop won't ever make much profit again, whether it bankrupts next year or 20, if it never makes profit the stock is worth $0. And as we've seen through the cycle, this was actually true. Gamestop hasn't made an annual profit in over 3 years. With this "undervalued" gaming cycle you talk about, they made $80m in a quarter which they promptly blew in losses the next quarter and are increasingly losing money, to the tune of $100m/quarter. Instead of a typical small cap value company that is making 15 P/E, Gamestop is doing the opposite and losing that much money, -15 P/E, in a dying, declining growth business. Feel free to buy shares for $100, where every year they give you $94 value back, to sell physical copies of video games... Those are the actual fundamentals. Gamestop stock value represents a lottery ticket that they will ever make some money again. It's not worth much.
  - clktmr 5y ago
    > whether it bankrupts next year or 20, if it never makes profit the stock is worth $0. A business is at least worth it's liquidation value at any time. And $GME was trading near liquidation value. Feel free to read up on Cigar Butt Investing if interested.