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Comment by vegesm | Hacker News Reader

Why would shorting Gamestop mean making it to go bankrupt? The falling stock price of a company doesn't cause a company to go bankrupt, the causality is in the other direction. Putting downward pressure on price is useful only if you want to do a hostile takeover.

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Because Gamestop is a business that is in the process of adapting to changing market conditions, which generally requires capital, and when market analysts go big on shorting in public it depresses stock price, and issuing stock is a major common method by which businesses raise capital.

As another example, lots of people assume Elon Musk got mad at short sellers because he took it personally, when in fact they were fucking with his ability to raise money he needed to ramp up production and meet manufacturing goals.

These things don't happen in a vacuum. Large funds making public bets against a company have a material impact on that company's liquidity.

Short-sellers are part of the free market. They are how the equation balances itself when trying to find the "true value" of a concern, or at least an approximation thereof.

Obviously the person who owns stock, or is set to earn billions when the share price reaches a certain level is going to be adversarial to someone whose actions result in the share price being depressed - even if that is the fair value.

> Large funds making public bets against a company have a material impact on that company's liquidity.

There are always bigger fish - and if the public bet is wrong, someone can, and will earn money at the funds' cost.

Edit: shareholders dislike shorts the same way employers dislike employees sharing salary information; it's a losing proposition for them, but a fair one.

> Short-sellers are part of the free market

Not when they get to simply turn off the half of the market moving against them they aren't.

I would like you to show me where this free market is, because it certainly isn't NYSE. The minute anything unexpected happens we're hit with trading halts, brokers riding the line of insolvency, SEC investigations, and congressional freakouts.

This narrative that GameStop is actually a good company and it's turning around despite all the short interest is pure bologna. Worse, it's intentionally misleading and often espoused by people who have a financial interest in the company. It's crazy to see people in this forum, who are typically tech forward, hype up the business model of selling physical copies of video games.

This is a common reaction to people who haven't followed Gamestop for a while. Cohen and RC Ventures bought in a while ago and have been pushing for the company to pivot out of the brick-and-mortar focus. This is why 'people who have a financial interest' are talking this way. Everyone involved recognized this would be an expensive proposition. Then the short sellers showed up.

I think focusing on how it hurt GameStop isn’t the right perspective here. I think it’s more about how greedy and over-leveraged the short holders were. When average Joe goes crazy over-leveraged, the entire world says “well duhh, you took a risk and now you have to pay.” But when a hedge fund does it, they get to just make a call to turn the market off for a few hours and try to bail out their shorts? The hypocrisy is stunning.

"Over leveraged" typically means you traded too much on credit in proportion to how much collateral you have, not that the trade is risky. A very large short position is reasonable for a company that is likely to go out of business.

I understand what over leveraged means. This was /also/ an incredibly risky short to start. I’m not convinced that GameStop was ready to go out of business. Struggling, sure, pandemic and all that, and that would justify a put position, but the market also reacted exactly how it’s allowed to and called out a short positions bluff.

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