The big GameStop short: Reddit traders outmaneuver US hedge funds

[Anh_Minh]

Originally Posted by dragon1412

I don't understand much about financial hedge funds so I ask what you guys will probably laugh a me for: How exactly did this move attack the supposed groups ?? I supposed the bet things is refer to investing in something, but isn't at the end gamestop still dying as their issues isn't purely related to money, for redditors who use their money on gamestop aren't they gonna get affected as well ??? How does robinhood relate to this by automatically selling ??

Here's a pretty good explanation:
https://twitter.com/joncantor/status...58321610735616

And here is another, in a 3 panel comic which may well be no less accurate:
https://www.penny-arcade.com/comic/2021/01/29/stonk

To focus on your question:
The hedge funds bet that the price would drop. If it climbs, they stand to lose money (and indeed, at least one needed recapitalization - like a bailout, but not from the government... yet.) And the mere fact they made that bet pushed the price down. But...

The redditors just bought stock. They stand to make money if the price climbs. And the fact they bought pushes the price up for two reasons:
- if people buy, the price climbs "naturally"
- all those hedge funds are contractually obligated to give stock back to whoever they borrowed from. At any price. And if there's nobody to sell because all the stock is in the hands of redditors who just want to see the hedge funds burn, well, that price could get pretty high. (It's not - offer enough money and you will find people to sell. The question is if you can afford the price.)
If the redditors sell before the bubble pops, they make bank. If not, they may lose almost everything.

And Robin Hood? They're the brokers for the "little people". At least that's how they advertised themselves, or so I hear. The redditors have accounts there, that hold money and stocks. They give orders to buy or sell stocks, and RH is supposed to do it for them (because the little people can't just go to the Stock Exchange website and place an order like it's Amazon). But what RH did is say "that stock you've got that's climbing like crazy? You don't want it, I refuse to let you buy it and may even sell what you've got for you without asking."

(To be fair, it is a bubble. No one's denying that. To be even fairer, RH is partly owned by entities that stand to lose billions if people don't start selling Gamestop stock.)


As for what it means for Gamestop? I'm not sure. Maybe nothing. Because eventually the bubble will pop and they'll be right where they started.


====

Yet another perspective:
https://twitter.com/jbarro/status/1355167042039668740

[Psyco Diver]

I'm surpass how quickly politicians are reacting to this, it's almost like these hedge fund mangers have the politicians in their pockets or something lol

[Anh_Minh]

Originally Posted by The Green One

Fat Rich Wall Street Moguls: "The poor people are stealing money from us and playing in our playground and IT'S NOT FAIR"

Man this is priceless. If these idiots want pity so badly they can buy it. They've got enough money after all.

Yeah, but what if they buy it from the US Congress?

[Sheba]

Originally Posted by Psyco Diver

I'm surpass how quickly politicians are reacting to this, it's almost like these hedge fund mangers have the politicians in their pockets or something lol

Let's be honest here, everyone knew politicians have the dicks of hedge funders in their butts. Look at how Obama barely did anything to Wall Street, or how Francois Hollande bent over, like a hentai schoolgirl from those instant-loss 2 koma, after he promised to fight them in his presidential campain back in 2012. Those people could sit the presidents and threaten them mafia boss-style like "You see your children? It would be a shame if...."

Hedge fundies found maybe the worst kind of enemies, those with a deep rooted hatred for them and who have nothing to lose.

Also, never forget and never forgive

[Magin]

I haven't verified it myself, but supposedly... well, Citadel is one of those hedge funds. And Janet Yellen, who is Secretary of the Treasury (appointed by Biden, I believe)... she's part of Citadel.

Yeah, some politicians have skin in this game, and they're Not Happy.

[scififan]

The news story is quite educational.

My understanding of the story mostly came from CNBC and Youtube discussion. So, the vulture investors used media(such as CNBC) to promote short selling, ultimately ending the lives of the business entities. Then Reddit investors promoted opposite strategy to fry vulture investors. Then, the table is turned due to the friendly support from brokers such as Robinhood. Robinhood said it was due its own technical issue, so it was unintentional. Then, one of the interviewees revealed that brokers had a lot of to lose if vulture investors went down. The interviewee also blamed the relieve fund for giving more incentives for individual investors.

[Sheba]

Originally Posted by scififan

The interviewee also blamed the relieve fund for giving more incentives for individual investors.

tl;dr

"Noooooooooo! The poor must stay poor and be sent to work while COVID19 kill the weak!!!!111"

[Anh_Minh]

Originally Posted by Magin

I haven't verified it myself, but supposedly... well, Citadel is one of those hedge funds. And Janet Yellen, who is Secretary of the Treasury (appointed by Biden, I believe)... she's part of Citadel.

Yeah, some politicians have skin in this game, and they're Not Happy.

Citadel's not just one of those hedge funds.
https://www.washingtonpost.com/busin...mestop-reddit/

(Also, one of the links I posted earlier aired suspicions that Citadel participated, and profited off, the short squeeze in a more or less illegal way.)

Originally Posted by scififan

Then, the table is turned due to the friendly support from brokers such as Robinhood. Robinhood said it was due its own technical issue, so it was unintentional.

Unless you mean that RH unintentionally helped the Redditors due to a technical glitch, that's not what RH's CEO told Chris Cuomo.

Originally Posted by Sheba

Let's be honest here, everyone knew politicians have the dicks of hedge funders in their butts. Look at how Obama barely did anything to Wall Street, or how Francois Hollande bent over, like a hentai schoolgirl from those instant-loss 2 koma, after he promised to fight them in his presidential campain back in 2012. Those people could sit the presidents and threaten them mafia boss-style like "You see your children? It would be a shame if...."

Hedge fundies found maybe the worst kind of enemies, those with a deep rooted hatred for them and who have nothing to lose.

Also, never forget and never forgive

Yeah, uh, about that...
https://twitter.com/mims/status/1355275464043081730

[dragon1412]

@Anh_Minh: thanks a lot for your explanation. So in this scenario, the hedge funds try to use it's sway in politics right.

Ahhh, it's pretty much public knowledge at this point that all big corporate are in bed with some politicians, but this blatant move is just hurt to watch, I mean I'm not American, but the whole dirty dealing and financial markets control is pretty much all over the world. Sad times we are living in, and in other countries we don't even have a single victory.

[Anh_Minh]

Originally Posted by dragon1412

@Anh_Minh: thanks a lot for your explanation. So in this scenario, the hedge funds try to use it's sway in politics right.

Maybe. Maybe not. I mean, people from AOC to friggin Ted Cruz came out in support of the redditors. Who knows what, if anything, will come out of it?

And more importantly... Though the narrative is "Hedge funds" vs "little people", it really is "hedge funds" vs "other hedge funds". And on balance, I don't think the hedge funds want more regulation. Except maybe the losers, but since they're losers, who cares about them?

[Eisdrache]

I'm somewhat confused to how prices of shares can rise indefinitely. This would mean that there is an infinite number of shares on the market to sell to the constant demand. This to my knowledge is not the case.

Also I don't know how to feel happy about a garbage company like GameStop being flooded with value. Certainly not a fan of betting on companies losing value but I wouldn't mind them being grounded either.

[Anh_Minh]

Originally Posted by Eisdrache

I'm somewhat confused to how prices of shares can rise indefinitely. This would mean that there is an infinite number of shares on the market to sell to the constant demand. This to my knowledge is not the case.

What? It just means some people really want what shares there are. In theory, two entities could trade one share to each other back and forth over and over again to ever increasing prices.

Less intuitive is how Gamestop came to be shorted for 140% of float (that is, 140% of its publicly traded stocks have been lent out). Because that's a thing.

Also I don't know how to feel happy about a garbage company like GameStop being flooded with value. Certainly not a fan of betting on companies losing value but I wouldn't mind them being grounded either.

It's just a bubble. Who cares? This won't save it.

[The Green One]

I just hope that people don't end up throwing away their life savings on hoping to cash in on the next time they think this is going to happen. This craze won't last forever.

[AC-Phoenix]

Originally Posted by Anh_Minh

It's just a bubble. Who cares? This won't save it.

So much this.
Sooner or later the redditers will sell their shares again.

Moreover, as they only do it to damage the Hedgefund they might actually commit a crime.

YouTube

https://youtu.be/uUM8WmCWTHc

Sorry; dynamic content not loaded. Reload?

[Cosmic Eagle]

Ah, too bad I was too busy settling into my new location else I would have thrown in a few spare cash just to contribute sticking one middle finger to these destroyer hedge funds

Regardless of what financial people claim I'd rather more countries follow the East Asia route and heavily restrict or ban short selling outright (and yes, I know it's not a complete solution....Corrupt corporations will benefit off of it but that's why government inspection and audits of big corpos are necessary even if it's not palatable to some people's ears)

[dragon1412]

To be fair though, East Asia is even worse with oligarchy and wealth inequality, part due to the more hierarchy based culture. I personally think big boss mentality is worse in Asia compare to the west

[AC-Phoenix]

Originally Posted by Cosmic Eagle

Ah, too bad I was too busy settling into my new location else I would have thrown in a few spare cash just to contribute sticking one middle finger to these destroyer hedge funds

Regardless of what financial people claim I'd rather more countries follow the East Asia route and heavily restrict or ban short selling outright (and yes, I know it's not a complete solution....Corrupt corporations will benefit off of it but that's why government inspection and audits of big corpos are necessary even if it's not palatable to some people's ears)

You should be glad, as the people who did might have committed a crime, as shown above. The US has some strange laws where you can sometimes be sued there, even if you don't even live there.
Even if they can't though, your own country might still prosecute it, if the US asks for it, and it also constitutes a similar crime in your own. Really country dependant.

The especially dangerous part here is that a lot of people only did it to deliberately damage the hedge fond, which could actually make them liable. The mens rea might actually be fulfilled here.... And talking legal stuff, I suddenly rue having dropped out of law school.

[Anh_Minh]

Originally Posted by AC-Phoenix

You should be glad, as the people who did might have committed a crime, as shown above. The US has some strange laws where you can sometimes be sued there, even if you don't even live there.
Even if they can't though, your own country might still prosecute it, if the US asks for it, and it also constitutes a similar crime in your own. Really country dependant.

The especially dangerous part here is that a lot of people only did it to deliberately damage the hedge fond, which could actually make them liable. The mens rea might actually be fulfilled here.... And talking legal stuff, I suddenly rue having dropped out of law school.

I seriously doubt anyone's going to get sued, let alone convicted, for buying a few $1000s' worth of stock. Market manipulation is hard to prove to start with, but here? How would that even work?

Also, I'm not an expert, but shorting 140% of float, giving the illusion of more stock being for sale than actually exists, sounds more market-manipulationy to me than saying "a few hedge funds are going to really need those stocks soon" when it's true.

[Eisdrache]

Originally Posted by Anh_Minh

What? It just means some people really want what shares there are. In theory, two entities could trade one share to each other back and forth over and over again to ever increasing prices.

That cannot work. While the price will go up, the total amount of money available will not. At some point the price will be higher than what they can afford, at which it will plateau.

Originally Posted by Anh_Minh

Less intuitive is how Gamestop came to be shorted for 140% of float (that is, 140% of its publicly traded stocks have been lent out). Because that's a thing.

What I meant was that there is a finite number of shares being sold. At some point all the shares have been sold and thus while there is still demand, the offer cannot deliver and therefore cannot drive up the price anymore. However apparently it is possible to trade something that does not exist for reasons I do not understand, so this is more or less moot.

[Anh_Minh]

Originally Posted by Eisdrache

That cannot work. While the price will go up, the total amount of money available will not. At some point the price will be higher than what they can afford, at which it will plateau.

And they could reach that plateau asymptotically.

What I meant was that there is a finite number of shares being sold. At some point all the shares have been sold and thus while there is still demand, the offer cannot deliver and therefore cannot drive up the price anymore. However apparently it is possible to trade something that does not exist for reasons I do not understand, so this is more or less moot.

Well, the price has peaked at 500 or so before coming back down in the 300s, so it's not like it's an infinite rise.

And selling something you do not actually have is precisely what a short is...