weirdness happening in US company

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Forums › Finance and wealth management › weirdness happening in US company

Batman

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#281106 29-Jan-2021 21:28

i don't know if i have all the facts right but my understanding is

US company that makes losses of hundreds of million every year

billionaire(?s) try to short its shares

reddit thread gets fired up to make that company share keep going up so billionaire(?s) go broke

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#2644263 29-Jan-2021 21:31

https://www.theguardian.com/business/2021/jan/28/gamestop-fun-turns-deadly-serious-reddit-wallstreetbets

darylblake

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#2644265 29-Jan-2021 21:58

Lewis is great. I love watching him rant while he fixes boards.

He made a follow up vid about the shorting and how its continuing to happen.

tchart

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#2644266 29-Jan-2021 22:00

Shorting is pretty unethical so Im sure there won't be a lot of sympathy for people shorting who lost money.

https://en.m.wikipedia.org/wiki/Short_(finance)

However legitimate buyers are getting caught up thinking the shares will keep rising.

dt

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#2644272 29-Jan-2021 22:27

gamestop did almost 7B in turnover in 2019.. 5.5k stores world wide they even own EB games here in nz and AU

Institutional companies systematically shorted their stocks over the last 3 years taking it from $30 down to $3, which would net the institutions billions and severly hurt/bankrupt the company they've shorted.

Wallstreet bets reddit has been around since 2012, now has over 4m members and the members exploited a weakness in wallstreet as a bit of social jusitce, when short options are about to expire you pump the stock up.. then when short options expire the hedge funds have to purchase at market value pushing the stock even higher pushing the goal posts even further for other short contracts... then when they expire purchase again at market value pushing them even higher... and repeat...

They've basically pulled a reverse on the big hedge funds, giving them a taste of their own medicine.

There was some straight dodgy stuff going on in the market today with the owners of robinhood, the trading platform a majority of the redditor's use because of zero fees decided they were going to stop all trades on a bunch of heavily shorted stock the save the asses of the big hedge funds.. only allowing sells and no buys triggering panic selling.

Guess what, they owner of robinhood and melvin capital (one of the institutional shorters) are business partners who he just bailed out as this bankrupted the hedge fund losing them $1b every $17 it went up.. it almost $450 at one point.

Zero sympathy for the hedge funds, power to the people.

edit: poor spelling

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#2644299 30-Jan-2021 08:39

Not participating, but wholeheartedly hope this destroys some hedge funds.

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#2644300 30-Jan-2021 08:46

dt:
gamestop did almost 7B in turnover in 2019.. 5.5k stores world wide they even own EB games here in nz and AU

Institutional companies systematically shorted their stocks over the last 3 years taking it from $30 down to $3, which would net the institutions billions and severly hurt/bankrupt the company they've shorted.

Wallstreet bets reddit has been around since 2012, now has over 4m members and the members exploited a weakness in wallstreet as a bit of social jusitce, when short options are about to expire you pump the stock up.. then when short options expire the hedge funds have to purchase at market value pushing the stock even higher pushing the goal posts even further for other short contracts... then when they expire purchase again at market value pushing them even higher... and repeat...

They've basically pulled a reverse on the big hedge funds, giving them a taste of their own medicine.

There was some straight dodgy stuff going on in the market today with the owners of robinhood, the trading platform a majority of the redditor's use because of zero fees decided they were going to stop all trades on a bunch of heavily shorted stock the save the asses of the big hedge funds.. only allowing sells and no buys triggering panic selling.

Guess what, they owner of robinhood and melvin capital (one of the institutional shorters) are business partners who he just bailed out as this bankrupted the hedge fund losing them $1b every $17 it went up.. it almost $450 at one point.

Zero sympathy for the hedge funds, power to the people.

edit: poor spelling

Interestingly it seems Robinhood pulled the plug because they were insolvent due to trading volumes and required security rather than colluding with thee hedge funds. Unfortunately they didnt tell their customers this and so their customers think they sold them out.

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#2644316 30-Jan-2021 09:18

The whole situation shows what has been happening to markets particularly the US for the last couple of years - in effect "influencers" are pushing stocks in the hope that people will all get sucked in to buying them, and when they start going up FOMO kicks in and people go crazy while the original "influencer" cashes out.

The markets these days are largely a casino. More traditional measures like P/E ratios and dividends are largely meaningless to these /wallstreetbets day traders.

freitasm

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#2644322 30-Jan-2021 09:23

Also note they are now pushing some other stocks up - including Nokia.

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#2644325 30-Jan-2021 09:41

It’s a game of ‘musical shares’ - when the music stops, many of those holding the shares lose their money. It’s like a Ponzi Scheme. The actual values of these companies are a minute fraction of the false valuations implied by the total market value of the inflated share prices.

Although the hedge funds have lost or will lose billions, the private investors who have bought into this lunacy stand to lose a lot more in aggregate. A massive price to pay just to see the hedge funds hurt.

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#2644327 30-Jan-2021 09:43

jonherries:

Interestingly it seems Robinhood pulled the plug because they were insolvent due to trading volumes and required security rather than colluding with thee hedge funds. Unfortunately they didnt tell their customers this and so their customers think they sold them out.

Jon

Yeah, right.

They pulled the plug because they and their owners are losing money and possibly facing bankruptcy.

Robinhood sells your trade data to Melvin and their other owners before your trade is even enacted, so that Melvin can take a profitable position based on that trade information.How is that ethical, and why is it even legal?

With Robinhood, their product is you.

Hopefully the SEC and US Government sort out this ripoff of the retail trading sector once and for all.

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#2644329 30-Jan-2021 09:48

eracode:

It’s a game of ‘musical shares’ - when the music stops, many of those holding the shares lose their money. The actual values of these companies are a minute fraction of the false valuations implied by the total market value of the inflated share prices.

Although the hedge funds have lost or will lose billions, the private investors who have bought into this lunacy stand to lose a lot more in aggregate. A massive price to pay just to see the hedge funds hurt.

Well, you’ve got that wrong.

This has been done as activism to try and force a change to the way the markets operate. Retail investors have been ripped off since automated trading came in and it’s completely unfair that small investor money is hoovered up so rapaciously.

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eracode

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#2644334 30-Jan-2021 09:57

@BlinkyBill Which part do you think I have wrong? The outcome - will the private investors make money out of this? If you’re talking about the motivation, isn’t ‘seeing the hedge funds hurt’ much the same as ‘changing the way the markets operate’?

I’m well-aware this is being done as activism in the name of democratisation of the markets - but that doesn’t stop it being lunacy.

Sometimes I just sit and think. Other times I just sit.

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#2644355 30-Jan-2021 10:58

freitasm:

Also note they are now pushing some other stocks up - including Nokia.

All the same people fell into the "5G is the next big thing" hole a couple of weeks ago and are investing heavily in anybody involved with 5G in the belief they're going to become rich.

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#2644421 30-Jan-2021 15:07

eracode:
It’s a game of ‘musical shares’ - when the music stops, many of those holding the shares lose their money. It’s like a Ponzi Scheme. The actual values of these companies are a minute fraction of the false valuations implied by the total market value of the inflated share prices.

Although the hedge funds have lost or will lose billions, the private investors who have bought into this lunacy stand to lose a lot more in aggregate. A massive price to pay just to see the hedge funds hurt.

I've seen/read a lot of people are willing to lose their lot invested, just to see the hedge funds hurt. Fair enough.

Sony

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#2644625 31-Jan-2021 02:37

Batman: ... billionaire(?s) try to short its shares ...

reddit thread gets fired up to make that company share keep going up so billionaire(?s) go broke

Long before there was there was the billionaire Ryan Cohen, there was Rod Alzmann, the proprietor of GMEDD.com. See Bloombergs OddLots podcast. They also discuss the gamma squeeze and the short squeeze.

If you want a blow by blow from one of the "winners", you can listen to NPR's Planet Money. The Indicator from NPR explain the short squeeze.

sbiddle: ... - in effect "influencers" are pushing stocks ...

Listening to the OddLots podcast above, I would have to disagree with you; but then knowing the internet / human nature, there will always be those that take a good thing too far.

Please keep this GZ community vibrant by contributing in a constructive & respectful manner.

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