For context one short seller (Citron Research) published this video explaining their belief that GME is a $20 stock.[1]
The way I see it, Citron believes this fiasco is irrational thought about the future of Gamestop and its value.
I think this is actually about the common retail trader manipulating the 'market manipulators'. In other words, let Citron taste their own medicine.
I think Citron failed to realize in the beginning that they were playing a different game than retail traders. Citron believes this is about value investing. WallStreetBets thinks this is a David vs Goliath situation, regardless of the stock they are fighting over.
Volume for the day is currently at 134m. Even at $80 average trade price, that is over $10 billion worth traded today. Average volume was 20 million for a whole day, and at $20 was about $400m trading hands.
Do the wsb retail investors really control enough money to be buying up the stock this much? If they do, that means they could do this to many stocks...
Let's be real here, WallStreetBets thinks it's about getting 2000-20000% gains in xx months - "sticking it" to some boomer short seller (their words) just sweetens the deal. It's a culture that revolves around pure gambling.
I wonder if the recent hunger for the new PS5/XboxSeriesX, namely the lack of supply, scalping, and massive web traffic trying to secure online orders, contributed to a short-term distorted view on the stock.
I’ve been following this for a few months and it’s really interesting to me that retail investors could actually have this sort of influence on a non penny stock. Given the high volume of trading, it doesn’t seem like there would be enough buyers to drive the price up this high, and institutional buyers I would think are staying away from something that seems to move so far away from its fundamentals. This is very different from the run up in Signal Advance caused by Musk’s tweet or people buying the wrong Zoom stock. There is very real volume here.
It isn't just retail investors. Rational buyers (including institutions and algorithms) would purchase this stock if they believe there are people they can unload it onto at a higher price. Now think about the second order consequences of that — the buying frenzy will continue until the bubble bursts.
Institutional hedge funds got greedy and they're getting punched in the gut by retail investors; personally i think it's nice to see.
A few comments on the price action:
1) true short interest is unclear; remaining short-sellers will likely be forced to "buy to cover" over the next few days, potentially driving the price even higher.
2) WSB users invested heavily in call options; "exercising a call" option can also drive price action higher if they were sold a "naked call".
"Markets can remain irrational longer than you can remain solvent."
Not that the GME stock is necessarily being traded on an irrational basis at the moment - I haven't done any research on it - but I think people need to remember that a lot of the inexperienced robinhood traders are just engaging in speculative gambling, and knowingly or not, pump and dump schemes.
The hedge funds shorting this like Melvin entered into a very crowded trade where the risk / reward towards the end, when GameStop was trading in the $3-$4 was very questionable. Over 100% of shares were sold short. This was at a time when GameStop had a book value of around $10. There's a reason why certain individuals / value funds have been buying heavily into this stock with 5% ownerships being disclosed at one time or another: Michael Burry, Donald Foss, Must Asset Management, Senvest Capital, Ryan Cohen.
Hedge funds like Melvin have billions of dollars under management and they need to allocate a certain percentage of that pool to each idea they have to make sense financially and they poured too much money into this one short idea than would be appropriate from a risk management perspective. They didn't do their research properly and probably thought the company would go bankrupt. That wasn't the case. GameStop doesn't have much debt and they survived the pandemic. The shorts should have realized their mistake and started covering. What was going on for months this summer and fall seemed like the posterchild of an inefficient market. Instead the shorts doubled down and they've tried to break the momentum of people buying into the stock ever since September when it started rallying by heavily naked shorting and buying large blocks of short term puts. You can observe this by reading level 2 and seeing the entire tape being red and bid prices being rapidly sold off. Numerous articles were written weekly on various financial sites saying the stock rise doesn't make sense and some were even irresponsibly telling retail investors they should short, often lying through omission on important details like Ryan Cohen becoming an activist investor and the extremely high short float and the new console cycle and the new microsoft deal and huge ecommerce growth. I question how many of these authors had connections to the short funds and wrote articles for them.
Robinhood has gotten a lot of flak recently for the power they've given inexperienced traders, but without them this wouldn't have happened. They're really living up to their name.
Exactly - people underestimate the wisdom (and the power) of organized crowds. Governments can be topped by crowds, which is why they try very hard to not become too unpopular.
Institutional finance is just a percentage of what some people put in the market.
And like governments, they may start realizing they must not do things that will make too many people angry, as the scale does not work in their favor now that new tools have made greater cooperation possible.
[+] [-] Goosee|5 years ago|reply
The way I see it, Citron believes this fiasco is irrational thought about the future of Gamestop and its value.
I think this is actually about the common retail trader manipulating the 'market manipulators'. In other words, let Citron taste their own medicine.
I think Citron failed to realize in the beginning that they were playing a different game than retail traders. Citron believes this is about value investing. WallStreetBets thinks this is a David vs Goliath situation, regardless of the stock they are fighting over.
[1] https://twitter.com/citronresearch/status/135234404324660838...
[+] [-] boatsie|5 years ago|reply
Do the wsb retail investors really control enough money to be buying up the stock this much? If they do, that means they could do this to many stocks...
[+] [-] TrackerFF|5 years ago|reply
[+] [-] tmpz22|5 years ago|reply
[+] [-] boatsie|5 years ago|reply
[+] [-] sombremesa|5 years ago|reply
[+] [-] scsilver|5 years ago|reply
[+] [-] ffggvv|5 years ago|reply
[+] [-] chovybizzass|5 years ago|reply
[+] [-] the_drunkard|5 years ago|reply
A few comments on the price action:
1) true short interest is unclear; remaining short-sellers will likely be forced to "buy to cover" over the next few days, potentially driving the price even higher.
2) WSB users invested heavily in call options; "exercising a call" option can also drive price action higher if they were sold a "naked call".
[+] [-] generj|5 years ago|reply
Every single strike price on Friday was in the money on expiration. It’s hard to overstate how ludicrous that is.
[+] [-] TrackerFF|5 years ago|reply
"Markets can remain irrational longer than you can remain solvent."
Not that the GME stock is necessarily being traded on an irrational basis at the moment - I haven't done any research on it - but I think people need to remember that a lot of the inexperienced robinhood traders are just engaging in speculative gambling, and knowingly or not, pump and dump schemes.
[+] [-] MandieD|5 years ago|reply
[+] [-] abbbccdefd|5 years ago|reply
Hedge funds like Melvin have billions of dollars under management and they need to allocate a certain percentage of that pool to each idea they have to make sense financially and they poured too much money into this one short idea than would be appropriate from a risk management perspective. They didn't do their research properly and probably thought the company would go bankrupt. That wasn't the case. GameStop doesn't have much debt and they survived the pandemic. The shorts should have realized their mistake and started covering. What was going on for months this summer and fall seemed like the posterchild of an inefficient market. Instead the shorts doubled down and they've tried to break the momentum of people buying into the stock ever since September when it started rallying by heavily naked shorting and buying large blocks of short term puts. You can observe this by reading level 2 and seeing the entire tape being red and bid prices being rapidly sold off. Numerous articles were written weekly on various financial sites saying the stock rise doesn't make sense and some were even irresponsibly telling retail investors they should short, often lying through omission on important details like Ryan Cohen becoming an activist investor and the extremely high short float and the new console cycle and the new microsoft deal and huge ecommerce growth. I question how many of these authors had connections to the short funds and wrote articles for them.
[+] [-] Miner49er|5 years ago|reply
[+] [-] rtkwe|5 years ago|reply
[+] [-] 1996|5 years ago|reply
Institutional finance is just a percentage of what some people put in the market.
And like governments, they may start realizing they must not do things that will make too many people angry, as the scale does not work in their favor now that new tools have made greater cooperation possible.
[+] [-] unknown|5 years ago|reply
[deleted]
[+] [-] unknown|5 years ago|reply
[deleted]