The full Gamestop (GME) story so far - and where it might go

pupil3142 wrote:

Question; Robinhood (claiming clearinghouse rules) allowed selling but not buying. But that is not a broker's job. A broker's job is to match buyer to seller - hence we have a price. Clearly this hasnt really been happening. But then brokers are traders and investors.

The broker doesn't not match buyer to seller, price discovery and execution is done by the exchanges. The clearing firm matches counter-party participants ( the so-called back office) and assumes the risk because they guarantee that their customers (BD) have the funds to effect the trade. While its the job of the broker/dealer to make sure their clients have the funds to back a trade, the clearing firm can, and does, step in to raise margin requirements until the storm passes.

A lot to digest here. As far as how this ends I don't think anyone knows. The stock could collapse in 20 minutes if people start to get cold feet. But I think there's a lot of people determined to hold right now. I have friends who don't do stocks other than mutual funds who picked up a few shares just as an eff you to the hedge funds and have no intent to sell. If this is happening on a large enough scale it could dramatically shrink the supply.

I would be stunned if there are not still massive short positions out there. The reddit guys may have broken Melvin but I would bet as the stock skyrocketed even more big boys entered the game with short positions. Being greedy many of these are likely still holding expecting a bigger fall.

It is much harder to get a big rally going now as the market cap of Gamestop is about $16 billion as I write this. When the share price was at $20 and the market cap at something like $1.5 billion it was much easier for the little guys to change the share price. Especially since many of those shares were not tradable. A few hundred guys attacking all at once can affect the share price much more than they can now. Also, they caught the hedge fund guys off guard which will not happen twice.

Primo Numero Uno wrote:

A few hundred guys attacking all at once can affect the share price much more than they can now. Also, they caught the hedge fund guys off guard which will not happen twice.

I still wonder if someone will get in legal trouble over this as reddit types make a go at more random unloved stocks. posting on an online forum about a stock being undervalued, or pointing out the potential for big gains is one thing, but when coordinated efforts to distort prices is moving into market manipulation.

The now famous former track athlete had a reasonable basis for his investments, but other players in this seem to be in this almost just for the amateur securities fraud aspect, which seems weird.

Tatar wrote:

If you look at the forum many of them don't care. They are saying their $10000 is meaningless to them but collectively they are severely frustrating the big shots. Long lasting hatred towards Wall Street from 2008/09 is fuelling this. If the stock price of random failing businesses is indeterminable it makes hedge funds job harder and their lives miserable - which is the purpose. I suspect action again other stock is on the cards.

This attitude strikes me as misguided. I guarantee you hedge funds collectively will come away from this with a net gain, and individual retail traders will collectively come away losers. It's basically saying I'm giving my $10000 to some hedge funds to screw the hedge funds. A few individuals will win big, but it's just like the jackpots at the casinos -- it encourages more people to gamble, which is exactly what the house wants.

I agree there is a thread of resentment about 2008 fueling some of this, and that resentment is completely justified (although I think it was mostly big banks, rather than hedge funds, caught up in that crisis). But buying GME strikes me as a dumb response. If you wanted to reign in the finance industry you should have voted for Elizabeth Warren.

Agree with what Roy and Primo both said.

Today was interesting. We don't seem to have any good data on how large the short positions are, which is crucial to understanding who's winning right now. Personally I would guess there are still great conditions for a squeeze, but there probably needs to be a catalyst. But I don't know.

How will the funds that collectively had shorted 100% of float at < $10 cover and make a profit will GME sits above $200?

Short sales do not have an expiration. When you are short stock it is just the opposite of being long the stock. You will have to post margin to sell shares short, but as long as you can meet the margin requirements you can hold the shares short as long as you wish. As was pointed out, if there is high short interest, whoever lent you the shares to short will require compensation for lending out their shares so you will have to pay a fee for borrowing the shares (interest) and the lender can also call back the shares if they wish to sell them.

The short squeeze in GME has already occurred. Hedge funds are not dumb and do not have the same "hold until it comes back" mentality that many retail traders have. No hedge fund is sitting in short positions they entered when the stock was trading under $10 a share when the price is currently above $200 or whatever it's at now. Also, many hedge funds also made a killing off the rise in stock price. Melvin Capital and a couple other hedge funds may have been hurt by being short, but many more hedge funds made more than those companies lost. So much for sticking it to the hedge funds.

In all honesty it is going to be very hard for the reddit crowd to get the price any higher than the high we saw last week. This stock is essentially a ponzi scheme at this point where the redditors who already bought and are "holding to the moon" need to attract more noobs to come in and buy the stock at a ridiculously impossible valuation to increase the price and allow them to realize their gains. This is why they are moving on to other stocks and commodities that they can turn into ponzi schemes.

2600 bro wrote:

How will the funds that collectively had shorted 100% of float at < $10 cover and make a profit will GME sits above $200?

They won't -- those funds have already lost money (and I think one or two have basically collapsed). But I believe other hedge funds have been doing a lot of the buying, and other hedge funds have been short selling at $400 and $300 and they will turn a tidy profit once the stock goes back down to $30.

its internet millenials vs hedge fund boomers.

The outcome doesnt matter but the tears are delicious.

How many of the participants have realised that the feds are going to come knocking on their doors?

Finally the millenials will realise (maybe) that the world isnt memes, influencers and world of warcraft.

+1000 on this.

A full day with no gamestop thread activity pretty much means this is over.

So, what now with the actual company, Gamestop? I would kind of like to go in and buy a game just for the hell of it, to congratulate them for still being there. They probably have a $5 bargain shelf. Of course I know another store with a $1 bargain shelf.

what is interesting is that yesterday there were steady gains throughout the day. There is almost a consensus around the $100.

This is a curious middle ground. Everyone knows the stock is worth $teens tops, so why hasnt it continued to fall to its correct value?

The answer is that this game is only 'probably' over. But maybe not.

As for advantage to gme themselves? Well, they had announced they would sell some stock - they can sell a decent amount and buy it back in a few weeks - loads of free money for the refreshed board to invest with.

Or just get cash rich, tank the share price and get an amazon buy out at $20?

I caught an interview with a woman on CNBC last week. She argued (persuasively imo) that the big surprise in all this is how dumb the hedge funds were that were shorting it. First of all she argued that it was crazy for short interest to be over 100% . I'm not understanding exactly what short interest percentage means or the ramifications. But I know 30% is considered very strong short interest. Furthermore she noted that hedge funds shorts were publicly making their positions known. Typically that works for them as they do negative advertising on the company to promote and bolster their position. But it is naive or incredibly arrogant of them to believe that can't back fire on them.

In any case, except for entertainment purposes, this should not be anything one has to pay attention to if you are investing in quality companies and hold for the long term. What would really be disturbing is if this became a real risk to the financial system as some are saying it potentially could be. I can't believe it would. But if that risk is real then this financial system has reached an all time low if that could happen over traders doing battle over stocks like freakin GameStop.

Ryan, more than 100% of the float can be shorted because some shares can be lent out to short more than once, and some of the shares that are in the hands of long term investors like institutions can also be lent out to short, in addition to the ones in the float.

Also, the number of shares being shorted of a company at any given time is not secret, but is publicly disclosed. I cut and pasted statistics i just got off of Yahoo Finance for General Electric, for example, but all companies publicly traded are listed as well. You can see that it list short interest rather thoroughly:

"Share Statistics

Avg Vol (3 month) 3 92.05M

Avg Vol (10 day) 3 107.74M

Shares Outstanding 5 8.76B

Float 8.74B

% Held by Insiders 1 0.24%

% Held by Institutions 1 62.11%

Shares Short (Jan 15, 2021) 4 88.55M

Short Ratio (Jan 15, 2021) 4 1.23

Short % of Float (Jan 15, 2021) 4 1.02%

Short % of Shares Outstanding (Jan 15, 2021) 4 1.01%

Shares Short (prior month Dec 15, 2020) 4 84.25M"

In fact, when considering to buy a stock, i would always check what percentage is held by institutions and what percentage is being shorted, which gives you a little background on what you are dealing with, You can also find a general outlook on the stock in terms of a ratio of buy to sell opinions by the analysts.

What is this playground nonsense.

https://youtu.be/5vFCTL6hIVE

I feel bad for the people who bought in above 450.or really anywhere above where it is today.

Weird story.

Sucker born every minute.