The Reddit GME short squeeze game plan (143 days old)
old.reddit.com
old.reddit.com
There was also a post along the lines of "there are ~50M public shares, 2M of us, if everyone bought 25 shares, we own GME!" At that stage, it was trading between $5-10 so for ~$250, it was silly but not impossible.
But the point is that NONE of this information or analysis was secret, conducted in back rooms, or even hard to find. If you didn't know the terminology and implications, it might be hard to decipher without someone else doing the heavy lifting but that's no different than any other market analysis.
For WSB, this is a perfect positive black swan. The downside was capped ($250 at the time) and the upside is unlimited.
CNBC, et al need to look past the shitposting and see this is a new creature.
https://anupamchugh.medium.com/gamestop-is-the-black-swan-of...
Sorry to be a bit snarky, but fad-based bubbles are not what markets need. They don't need social justice either. If you want to trade stocks, do some research and invest wisely for the long term. I am personally weary of 24/7 outrage.
Now, not only is the stock market all f'd up, we gotta listen to one inane story after another about a market riot.
Not only that, you gotta now worrying if your investments will suddenly and inexplicably become the target of some online mob's ire and get spiked for absolutely no reason. And don't be fooled. These things will absolutely be gamed by botnets, astroturfing, and smear campaigns until kingdom come.
It's just another landmine that makes the whole background of life suck even more.
But yeah, let's get them CNBC types! Burn it down!
In fact, I would argue the GME episode has made life suck a lot less for plenty of people - some made money but a lot of people have just had fun laughing, making memes, and putting some money in because, well, what else are you gonna do? The stock market is not F'd up because of retail investors. What should we do - just sit on our hands and hope the free Ford stock Robin Hood gave us goes up? Why not have fun and dream a little and learn about the market in the process?
The worst I've seen is maybe a paternalistic attitude of "some inexperienced day traders are now at risk of being taken for greater fools," which I find hard to disagree with, to be honest. Or else they're slightly sniffily pointing out that short selling is not inherently immoral, and that many Wall Street firms are actually delighted with the windfall in fees from all this extra market activity.
Speculation is a huge part of the market, and "sophisticated investors" take part in it all the time. Tell me why certain popular tech stocks are trading at P/E ratios of more than 1000, or pulling in negative income year after year. Be sure to justify your answer using "fundamentals".
Are you proposing that we rein in speculation in a wider sense? Then please, sign me up! But let's not do this with mobs and all the screaming, please.
An example: One could argue that TSLA's current price is almost entirely speculation divorced from current fundamentals. Are you sure it will be "good for a lucky few and very bad for lots of people when it goes off the rails"? It's possible, but what should we do about that? Restrict people's ability to trade TSLA?
In the case of Gamestop, I agree with you, it will be bad for lots of people who get in late. I think more people should be informed about risk before entering the stock market, but I don't know if I agree with you that we need more government regulation in the market to do this. What would that look like?
It would be hard to see how anyone was hurts by GME speculation or organized buying. (Assuming nobody gets government bailouts.)
This is a lot of the problem. Certain people are too big to fail, they can keep the profits, but they don't suffer. How many people who had barely heard of the stock market lost their homes after 2008? How many speculators lost their homes?
How many people who have barely heard of the stock market have made massive gains over the last 10 years? How many speculators?
The government borrowed trillions, that all ended up in the pocket of people with shares, not in the hands of people who struggle to make rent.
That's because the they still in the pump part of the pump and dump scheme.
People buy Tesla because they think its worth even more. Everyone who has thought about it for more than a second understands GME is not worth 22 Billion dollars.
So the people who are buying now are going to collectively lose a ton of money when it inevitably crashes back down to 8 bucks a share.
The people knowing engaging in the short squeeze are taking that risk, so that is on them. But I feel sorry for people who foolishly chase the gains or the wifes/husbands of fools who are buying in now.
The whole ideas is that the hedge funds are these "bag holders." And to a huge degree they were, which is hilarious. But a huge amount of the bag holding is going to be done by retail investors.
Yup, people are buying into a misconception here that because of high short interest there must be more to squeeze and the shorts will be the bag holders, while completely ignoring that the further this goes from the actual value of GME the more attractive it is to short, so who is short may change, but short interest won't go down much. The mob for some reason sees the short interest not going down as "they'll have to buy it at a higher price!" Once the smart longs start taking their profits the whole idea will fall apart, some shorts are going to make much more than people who bought early in the run and held thinking it would keep running up.
To take the other side of the argument, the linked post is not about a value "not tied to the fundamentals of a security." In particular, it claims:
>> For reference: if $GME was trading at the same P/S multiple as $CHWY, the share price would be $420.
Now, this argument is wildly speculative to me, but it is in fact an argument about the long-term proper value of the company based on a fundamental.
The most recent hype train of "hold diamond hands to the moon rocket" is indeed disconnected from the value, but note that the current stock price is still within a small multiple of the above-quoted long-term level.
> If you want to trade stocks, do some research and invest wisely for the long term.
That's undoubtedly the safest advice, but this does not make short-term investment illegitimate. Stocks reach long-term value as a series of short-term movements, after all.
Taxpayers have been pumping cash to share owners for the last decade. If a frickin pandemic can't cause shareowners to stop increasing their net worth, what will?
Because while non-shareholders are working on treadmill living and majorly suffering, there's something seriously wrong. Either fix the market and the wealth disparity, or some people will just say "ah fuck it" and watch the world burn.
There seems to be a massive misunderstanding that somehow because these discussions happened publicly on reddit everything is fine and dandy. It seems people are conflating insider trading (which has nothing to do with the $GME short squeeze unless you’re wearing a tinfoil hat) and market manipulation. I would be surprised if the SEC went after redditors (this time, at least) but there is no “we did it openly and conspicuously” safe harbor or defense when it comes to charges of market manipulation or securities fraud.
There’s a reason market commentary comes with a whole bunch of disclaimers in the footnotes with language like “not intended as investment advice” and “references to specific securities and issuers are not intended to be, and should not be interpreted as, recommendations to purchase or sell securities”.
Or that "I'm buying to squeeze the shorts" is manipulation and "I'm buying because the shorts are overextended" isn't.
You are buying in specifically to manipulate the price of availability of an asset in the market.
> I'm buying because the shorts are overextended
You're buying in based on some perception of the market, but not attempting your action of "buying in" to have a direct impact.
Ya, they can be very similar, but as with a lot of legal aspects, intent matters (but is still hard to prove).
Regarding investing in a targeted managed fund, I think it's different because the rules are sort of different. A fund has to have an exit strategy that is a net positive for the whole fund. A fund can't make a profit for half of it's investors, and a lose for the other half of it's investors, on the same position. If there is no exit strategy, the position/play/trade/whatever doesn't make sense.
The current WSB exit strategy seems to be "hope to make it out before everyone else loses money".
> You are buying in specifically to manipulate the price of availability of an asset in the market.
Naive question: isn’t shorting market manipulation as well or only if it is coordinated among many people?
Any action that can impact the price of something can be called "market manipulation". Apple releasing their quarterly earnings affects the price, but is clearly not illegal.
When people short a stock, it is typically because they believe that the current price is not representative of what the business fundamentals and environment dictate it should be. Ie, they expect it to go down in the long run. While yes, the act of "shorting" can lower the price, that is not the main goal of the action, and it doesn't actually cause them an immediate profit (if they wanted to exit their position, they'd have to buy it all right back up, and the price would rebound as they do).
I suppose my point is that someone with intent can use careful language to avoid creating any evidence of intent (and lawyers will cheer them on) and then someone without much in the way intent will say something sloppy that implies intent (and lawyers will punish them severely).
And the unwritten/unknown rules of how to do skirt around the law aren't going to be changed by this situation. We still (in my opinion, unfortunately) have a legal system that is way to heavy on "word of the law" vs "intent of the law".
We saw some of this a couple weeks ago. True intent is hard to prove through words, and context is super important.
For what it's worth, I seriously doubt that someone on reddit who made an market-manipulation-incriminating statement and made a couple hundred bucks will face punishment. I suspect that when all of this is looked at at the end, the "gains" will be rather bi/tri-modal. A ton of people losing money, a bunch making a little bit (relatively), and then a small handful who make absolute bank. The group on the right are the ones who will have to be careful/worried.
It is so hard to prove that it becomes practically impossible in most cases, which leads to legislation that can choose when to strike and when not, leading to further concentration of unassailable power in regulating entities.
I don't think it is generally considered such? Unless it involves putting out fraudulent/false information.
Porsche execs were investigated/tried in Germany for lying about their financial situation in order to trigger a short squeeze on Volkswagon (i believe none were convicted) -- the potential crime was the fraudulently misleading communications, not the short squeeze itself.
Because this seems just like any other short squeeze, the difference is mainly that it was planned in public instead of secretly in private. And that makes it less likely to cross the line into some kind of illegality, not more, right?
"Market manipulation" itself is not necessarily illegal, if you just mean doing things that will effect the market in a way to bring profit to yourself. It's what tons of big traders do all the time, right? It's illegal when it involves fraud, lying, secret collusion, insider trading, dereliction of fiduciary responsibility, etc. Any kind of 'short squeeze' could certainly be considered "market manipulation" in the plain English meaning of those words, but that doesn't mean it's illegal.
This investopedia article [1] on 'short squeeze' says "Contrarian investors may buy stocks with heavy short interest in order to exploit the potential for a short squeeze" -- it does not suggest there is anything illegal about that. Is that not exactly what wsb did, no more no less? they collectively decided to buy shares to exploit the potential for a short squeeze.
Investors do this all the time, the unusual thing here is that it was planned completely in public, and that it involved such a large number of small retail traders (in addition to a few pretty big traders... and quite likely other non-wsb-affiliated big traders we don't even know about who saw what wsb was doing and decided to go along for the ride, or who saw the short squeeze potential themselves independently).
Most traders don't put their "market manipulation" in public because a) they don't think it could work if they did, and b) they know they cross grey areas of legality all the time, so don't want their business to be out in the open like that.
But in this case... what law was violated?
> "Market manipulation" itself is not necessarily illegal, if you just mean doing things that will effect the market in a way to bring profit to yourself.
I’m not quite sure what you mean by this. Market manipulation is a concerted (and sometimes coordinated) effort to artificially influence the supply or demand of a security. Market manipulation often relies on false information but false information is not at all a required element of market manipulation.
Where things get interesting (and fuzzy) here that I’m not quite sure where the line is between a group working together to influence the market and just... the market. I suppose its theoretically possible for everyone in the market to coordinate against one or a few players. To my knowledge there’s never been a situation with such a large coordinated effort.
That said, there are definitely a handful of individuals on WSB who got the ball rolling and have profited heavily. I definitely think the SEC could make the case they've violated the Exchange Act and potentially the '33 Act depending on what % of $GME the group controlled.
Calling anything the retail / WSB investor crowd did in this scenario “manipulation” is ridiculous and insulting. “Coordinating” by explaining a strategy and inviting others to participate is not “manipulation.”
Oh, and you might want to google Phil Falcone.
I worked as a fund manager at an asset management firm for a few years, often sitting daily with our general counsel on many issues. Nothing you have said about this, including the totally off the wall comparison with Phil Falcone, causes me to believe your take is trustworthy here. I’m not a lawyer, but just because you allegedly are one doesn’t mean I’m going to take your opinion on this at face value.
> often sitting daily with our general counsel on many issues
I think you think this somehow bolsters your (again, completely emotional) argument? On the contrary, this is a pretty good indicator you don't understand federal securities laws. And I must say, I concur with your former GC's assessment.
I don’t know why you’re waiting on that. It’s absolutely not my job to go item by item through the comments and chronicle it for you, that’s on you if you care (or don’t, I don’t care, and I won’t be baited further). I just felt somebody needed to mention that they don’t take what you’re saying as accurate or trustworthy.
No one is asking you to "go line by line", but right now you're just yelling "YOU'RE WRONG I'M RIGHT" without even specifying what you're talking about.
In this particular case I think the arguments have been repeated many times across all the different GME threads. My goal is not to repeat them here, only to register dissent, which is a perfectly valid goal for me to have.
I'm sorry are you trying to make an argument that GME right now is based on evaluating the fundamentals?!?
> “Coordinating” by explaining a strategy and inviting others to participate is not “manipulation.”
Frankly, you're kind of right, if the premises of those strategies are valid, and are not "If we manipulate the value high enough", then it is not illegal market manipulation.
If the premise of your strategy is "manipulating the price of availability", then yes, it is. If the strategy is just blatantly factually wrong or fraudulent, then yes, it is.
I’m saying the author of the article (the reddit post) approached valuing it based on fundamentals. That is the whole point of a short equity squeeze - a stock’s valuation is predicted by many (wrong folks) to fall, institutional money takes a large short position, but a few smart speculators see a valuation-based reason why the price will actually (truly, not artificially) go up, thus squeezing the short sellers. The strategy kicks in only at that point, when buying and holding (based on speculating more intelligently about the true valuation) leads to further gains because of the short sellers’ situation. The reddit author even says explicitly - this is not a pump and dump, the stock will stay high.
Sharing a smart analysis and offering others the chance to execute the same strategy is not manipulation. It’s just a smart strategy. This guy and others who saw the opportunity early, realized GME was both fundamentally undervalued and also had super high short interest, just out-smarted professional traders and they are mad, so resorting to backchannel politics to drum up claims of “manipulation.”
Oh well I mean if the reddit author said it....
If you're arguing that it will stay high, you're saying that based on the fundamentals of the company GameStop should be a $20B company. Which is bonkers.
Your sarcastic “.. if the reddit author said it” totally misses the point. The point is not whether the reddit author is right only the reddit author is actually describing their honest strategy based on fundamentals.
Given the specificity of the strategy and the fact that it actually did turn out to be right it would seem like an extreme claim requiring extreme evidence to disagree or to presume some ulterior secret market manipulation motive.
Separately, I for one am not sure you are right to say $20B market cap of GameStop is crazy. I think it will drop yes, but not nearly as far as most people think. The change of board management for GME is quite a big signal of the large-scale ecommerce revamp they plan to execute, and that strategy was executed by the new board member previously at Chewy, so there is actual track record to believe this.
The valuation is high right now, sure, but I sincerely think it’s not crazy high. That’s why a lot of the WSBers and redditors are still refusing to sell. The plan absolutely was not a pump and dump, it was more like jumping on an airplane before it takes off - at least in their minds. Time will tell.
"Contrarian investors may buy stocks with heavy short interest in order to exploit the potential for a short squeeze"
Are you suggesting that is illegal?
And are you suggesting something diferrent than that happened here? If so, what made it different?
> exploit the potential for a short squeeze
Not illegal.
> Take action with the explicit intent to cause a short squeeze
Yes illegal.
Context matters though as to which side a given situation might come down on.
But yeah, it's possible if you have that intent in your mind, somehow it makes it illegal, the laws don't always make sense and I'm not an expert here.
I am pretty confident that large traders do this all the time though, have the intent to cause a short squeeze. But I wouldn't be shocked if there's something illegal that traders do all the time anyway (without advertising it on the internet!).
For millions of manic amateurs, it's mania and collusion. The planning of it is evidence.
So become rich, before you break laws, seems to be the moral hazard here.
And when a lawyer says "interesting," they mean "expensive."
> Where things get interesting (and fuzzy) here that I’m not quite sure where the line is between a group working together to influence the market and just... the market.
I think it's also noteworthy here that the short interest was at least initially over 100%. That's a powder keg; you don't "create" a short squeeze in that environment so much as just wait for any random spark to cause one.
If it comes down to the SEC prosecuting individual members of WSB (where they can't prove misrepresentation), I think there will also be substantial first amendment arguments at play. One recent rallying call of the bubble has been to buy and hold GME stock as a protest against hedge funds / the stock market as a whole, and on the face of things that's political protest. The SEC isn't in the business of investigating other politically motivated stock boycotts, so a politically-motivated stock purchase should also be treated with kid gloves.
> That said, there are definitely a handful of individuals on WSB who got the ball rolling and have profited heavily.
From what I can tell, RoaringKitty/DFV is less likely to be a target of a market manipulation charge because their arguments were made well over a year ago and were ultimately ones of value; the profit did not depend on causing a short squeeze, and DFV in fact took profit from a large portion of their initial stake by the end of 2020 (before the squeeze).
The linked post is more direct in "these purchases will cause a short squeeze," so it could more credibly be called manipulation. But again, the powder keg makes the analysis weirder.
But the people saying things like "buy GME and call your broker to instruct them not to lend your shares" or encouraging people to go "all in" and the comments specifically encouraging others to buy GME to screw $hedgeFund have left a pretty clear paper trail of their intent to induce others to purchase and manipulate the market.
I kind of doubt this. Lightning rarely stricks twice, and unless he has a history of these sorts of moves who knows if he'll have a pick like this again.
Also, the money would have to be reallly good considering he's by-far set for life after this.
My biggest concern for him at this point is that he'll get dragged in to investigations regarding this. I agree with you that he specifically doesn't seem to have done anything wrong. I don't think he even ever said "You should do this", or insinuated that others should; it was just a "This is what I'm doing and here are my reasons why".
I hope the next couple years of his life aren't an absolute shit-show dealing with fallout of being the most "high profile" name (so far).
Would things get fuzzier if just one person bought $100K worth, which the post claims would be sufficient to trigger a squeeze?
(Just asking theoretically, I'm not a participant :)
In 2013 Bill Ackman had a huge short position on Herbalife. Carl Icahn in front of millions of viewers on CNBC promoted a short squeeze.
"During the epic verbal battle between Icahn and Ackman that was televised on CNBC in January, Icahn predicted that Ackman’s Herbalife investment could produce the “mother of all short squeezes.” Shortly after that incident, it became clear that Icahn had taken a big position in Herbalife’s stock. He has since expanded that position, bought 16.5% of the outstanding shares and gotten two representatives on Herbalife’s board. "
https://www.forbes.com/sites/nathanvardi/2013/07/22/carl-ica...
If the Biden SEC comes after Redditors while the Obama SEC let this and many other things pass, whatever chaos they imagine won't begin to describe it. It's one of the few things AOC, Warren, Cruz, and many others (claim to) agree on.
It definitely looks like "market manipulation" but I think that's where the "public" aspect will play a part.
The defense will make the case of "why this group of little guys and not the hedge funds" against the SEC selectively prosecuting Redditors while giving hedge funds a pass.. in 2009-2010 under Obama and again under Biden.
I'll take the odds on WSB.
This definitely qualifies, because the stated intention is to move the price of the shares, not to acquire a position for any other reasonable purpose.
I work at a trading firm, if I outlined a plan to do anything like this I would (rightly) be fired instantly. If I actually did it I would go to jail.
The law shouldn't be applied differently for redditors, but probably it will be.
Regarding last week, what about the blocking of a number of symbols from being bought (but not sold) on retail platforms while the folks on the short side could unwind their positions? These were stocks with high short interest. How did Robinhood and IB and TD get the list, from analyzing Reddit in ML?
As to Robinhood, IB and TD, the Bloomberg reporting that DTCC (clearinghouse for trades) was demanding more collateral for the high volatility names and the retail brokers were facing a heard time coming up with it is pretty compelling. Unless someone can point to something other than innuendo, I’m probably gonna believe that.
The redditors have absolutely broken no laws, in fact there is not the slightest whiff of any reason to even suggest they might have. It’s just anger from wealth classes for having been embarrassed.
You're right. There was a concerted effort in the last week claiming that the hedge funds had closed their short positions. Turns out, a few had so GME went from 140% shorted way down to 130% shorted when historically, 25% is considered "high".
I hope someone looks into the hedge funds and the talking heads who spread this misinformation.
2. I didn't say any specific firm. I only know the aggregate numbers and the specifics on a couple and they're not one of them.
2) You intentionally used language that casts doubt on the only well-sourced statement, that Melvin got rid of their short position. If you're going to be so skeptical then I want to know why. If you think that CNBC is colluding with hedgefunds and intentionally publishing misinformation then I want to know why you are suggesting that.
https://financhill.com/most-heavily-shorted-stocks-today
250% of floating shares.
https://www.nasdaq.com/articles/are-these-the-best-heavily-s...
121% short.
I'm an outsider to both the investing world and this whole WSB thing, but just from following the story I've gotten the opposite impression. The general sense I get from the WSB community is more like "GME is a garbage stock, you should buy it and some of these other worthless stocks too!" Might still be a crime, but it's not really misleading IMO.
To me, none of it is fine. I hope that this event is eye opening enough that some protections are put in place that effect everyone, including hedge funds, that prevent this type of manipulation.
2 million people with $250, loosely coordinated vs. 2 hundred people with $2,500,000 pooled together with a full time manager.
If it’s anyone’s fault, it’s the hedge funds who tried to hammer GME into dust.
This would be fine by me: to just make whole sectors of these financial markets illegal, close some large exchanges and companies, in an effort to somehow limit their parasitism on the the real economy.
This strategy has been used for penny stocks for decades.
It’s just with the scale and reach of social media these days combined with the ability for things to get viral, makes it possible to target larger stocks.
- is the 'game plan' above evidence of that.
- when someone posts a screenshot of their position and emojis of rocketships, and a bunch of people respond with This is the way. and other meme-y jokes, is that manipulation?
If the second is true, we're in for a rocky road ahead. We are going to have to decide as a society how far we wish to go. People post Buy This, Sell That, I did this, I did that, all over the place and not least on retail financial news sites like Seeking Alpha. There are comments there, too.
Should we ban all comments and news from non official channels out of fear of getting sued or investigated for securities fraud?
A dystopian possibility is Reddit shuts all stock subs. Seeking Alpha turns off comments. HN bans talk of securities. YouTube pulls stock analyst videos and comments. Google fiddles with results to avoid people who aren't CNBC or an approved site getting hits.
Remember how they banned crypto YouTube videos?
Its hard to take WSB in earnest as a criminal element. If SEC or FED respond disproportinately, ut mught lead to the global "high finance" becoming a meme.
> And while the traders on r/wallstreetbets—the Reddit forum that kicked off the unlikely rally for GameStop stock—may be racking up profits, the damage is accumulating for short-sellers, the investors and hedge funds who bet against, or "short," the stock. By Friday, short-sellers had lost $19.75 billion on GameStop so far this month alone, according to S3 Partners, a New York–based firm that tracks short positions on U.S. stocks.
> The losses have hit hedge funds shorting GameStop including Steve Cohen's Point72, as well as other high-profile short-sellers like Andrew Left, who runs Citron Research, a firm that built a reputation for publishing reports on stocks he believed were destined to fall.
> After announcing last week that he was shorting GameStop when the stock was trading around $40, Left said Wednesday that he had largely abandoned the trade "at a loss 100%," covering the short—or buying back the stock—when it reached the $90 range.
https://fortune.com/2021/01/29/gamestop-stock-how-much-hedge...
"Winners of the GameStop rally included wealthy Wall Street hedge funds - The Washington Post" https://www-washingtonpost-com.cdn.ampproject.org/v/s/www.wa...
But a blanket restriction on risk taking as you're hinting at here to 'protect the vulnerable' is a red flag because who decides how wide this net is and the terms of the net. Concretely, what are we allowed to say and not say (the Reddit forum question at stake here), how much are we allowed to have and not have as demonstrable assets to qualify for a trade (Accredited Investor and Qualified Purchaser already exist in the private equity world), etc.
If you take a step back and put a magnifying glass on the principle, protect vulnerable people, you have to ask, what about: smoking, drugs, unhealthy foods in an obesity epidemic, extreme sports, combat sports, driving under the age of 18, and many other questions. What about poor people buying lottery tickets? If I go to a local bodega, I'll stand in line behind people buying lottery tickets, and you can see they are not upper income people.
The world is dangerous and we're all vulnerable, and yes, some more than others. Various societies have to decide on the scale of 0 to 100, how much we allow individual to hurt themselves. The answer will be different in China, Sweden, the United States, and so forth, owing to the values of the societies.
How about protecting vulnerable investors by regulating entities like short selling hedge funds?
1) gives too much benefit of doubt to these people. WSB types know very well that what they're doing is unethical and illegal. It's exactly what they accuse hedgefund boogeymen of doing to stir up their victims.
2) This situation isn't as novel as it seems. There are already deliberations and legal mechanisms in place to determine the culpability of someone who only took a small part in a crime, is a first-time offender or whatever other excuse there is.
3) To carry this point home, I think HackerNews already censors (thankfully) links that try to pump random penny stocks. This type of internet scheme is not new, and most of us have already decided it is something we won't tolerate. This behavior is outrageous and it's not made any better because it's happening in broad daylight or on a large scale. We shouldn't be in such awe of the 'revolution' that we are blinded to its impact.
Cue thousands of users replying stuff like, "This is the way. To the moon!" with hundreds, sometimes thousands of upvotes.
My question to you is extremely difficult to answer, but it is relevant because old fashioned law enforcement action as you've described aren't so straightforward here: how do you police that?
I suppose someone could use ML to go through the thousands of comments and look for someone saying something like, "There's a short squeeze so let's nab those bastards! Everyone hold!" because those comments do exist, in fact many of them are that. BUT then how would you prevent people talking in code? What if thousands of people just started posting their positions with a thumbs up emoji?
Now my second challenge for you (or anyone who thinks standard SEC protocol is so easily applicable here, open and shut case). What is the difference between a Redditer saying, guys, there's a short squeeze about to happen, buy buy buy! and this:
"Tomorrow am at 11:30 EST Citron will livestream the 5 reasons GameStop $GME buyers at these levels are the suckers at this poker game. Stock back to $20 fast. We understand short interest better than you and will explain. Thank you to viewers for pos feedback on last live tweet — Citron Research (@CitronResearch) January 19, 2021"
?
"Although some short squeezes may occur naturally in the market, a scheme to manipulate the price or availability of stock in order to cause a short squeeze is illegal."
But in this case, people are literally admitting "Yes, I would like to engage in your proposed felony." Even manipulation aside... conspiracy itself is a crime. I don't think conspiracies suddenly become legal just because they were very large.
ehhhhhh... I've seen plenty of BUY BUY BUY posts. Unless I'm missing your point. I understand what WSB isn't a corporation or entity in and of itself, but it is still a (somewhat) organised group of uh... "investors".
The bar to qualify this random association of people as organized seems pretty high.
I qualified "organised" with "somewhat", because nothing in this kind of place is ever really organised, but I mean just look at what they've done. You couldn't do this with a fully disorganised group.
- Reddit has your IPs logged for 100 days.
- The SEC knows all financial transactions.
Shouldn't be too hard to triangulate u/TigBitties_450 if he actually did any trading on the stock.
They should take this in the chin as a massive failing on their part to regulate the market just like they did in '08 aftermath when trillions of dollars and the world economy crated because of those same banks and hedge funds.
in theory you're right. The practice though says differently- the mass conspiracy and violation of medalion laws (Uber) and zoning laws (AirBnb) got treated as new phenomenon - "sharing economy" - instead of RICO because it was that massive and coordinated.
There is also another aspect here. The huge short interest on GME was most probably naked (illegal) in significant part, and those huge shorts were probably made in order to drive the price down (market manipulation, illegal). So, these crooks wouldn't have been caught with their pants down if SEC was doing its job and wasn't allowing (by lax enforcement at least) all these shenanigans to their hedge fund buddies. In that situation SEC suddenly becoming a crusader against market manipulation and going after WSB retail investors would look a lot like selective enforcement and a regulatory capture by the crooks.
"During the epic verbal battle between Icahn and Ackman that was televised on CNBC in January, Icahn predicted that Ackman’s Herbalife investment could produce the “mother of all short squeezes.” Shortly after that incident, it became clear that Icahn had taken a big position in Herbalife’s stock. He has since expanded that position, bought 16.5% of the outstanding shares and gotten two representatives on Herbalife’s board."
https://www.forbes.com/sites/nathanvardi/2013/07/22/carl-ica...
In my opinion, if you have to state multiple times in your plan that what you're planning isn't illegal/manipulation, it's very grey at best.
The fact that one of the premises presented here for the price going up is "We buy a bunch of options, to force (ie, manipulate) someone else into buying the stock, so that the price can go up" doesn't boad well for a "it's not market manipuation" argument either.
Straight from this post:
> It looks like this: RH Call Option buying -> MM Delta hedging/share purchase -> short squeezing -> Greater retail/RHers price action chasing/call option buying -> MM Delta hedging/share purchase -> short squeezing -> Institutional and new channels flip the script -> GME to $400+
They've presented a chain of events that starts only with "We try to buy a lot of it", has a bunch of "other people have to buy based directly on our actions", they even through in a "other people see the price going up and try to pile in" (ie, screw the rest of retail).
> the extent of their sympathy for the little guy will determine the outcome
I don't see the masses of people ending up facing consequences here. I wouldn't be surprised if a group of WSB pushers who made out like bandits do see consequences. I also think it's going to be difficult to consider them the little guy if they make a bunch of money, and the much larger mass of non-WSB retail lose their shirts.
I don't think this is logical. One could also say, "If people are accusing you of doing something illegal/manipulative and you don't respond by stating that it's not illegal, it's very grey at best."
Can we agree this is hyperbole?
The SEC could step in to resolve the squeeze and everyone who bought at 350 left holding the bag when the price drops to 30.
Do you think that people who bought $200/share option contracts this week are all going to end up with 100 shares that they are going to be able to sell for $525 each?
Do you also want cancer charities to stop asking for donations? Should start up founders not be allowed to ask for investor money?
I could totally see the market manipulation argument if this was done in backrooms, with multiple accounts to hide the moves, several shell corporations holding the funds, etc. But these folks are publicly declaring their intent. And the first person to uncover the gamestop shorts has been saying it for over a year. Out in the open with frequent updates.
The short sellers have had a year to get out and leave the company alone, but they were so obsessed with watching a company die that people got pissed and wanted some blood.
The chain of events doesn't start with "we buy a lot and blah blah blah" - the chain of events starts with someone declaring over a year ago "fuck these guys for going all in on destroying a quality company for no reason other than the lulz."
Surely a large group of people getting together and saying "GME is way too shorted, buy buy buy and don't sell until $5k" should either be absolutely definitely market manipulation, or absolutely definitely not?
This. I recall seeing a post recently that essentially said that any action could be construed as securities law violation.
I'm going to assume this wasn't your point, but come on. Don't compare the current actions WSB and others are taking right now to curing cancer.
> Should start up founders not be allowed to ask for investor money?
Startup founders are already not allowed to ask for investor money buy posting on reddit or buying social media ads.
> with multiple accounts to hide the moves, ... these folks are publicly declaring their intent
I don't think anyone has fully look in to what accounts have been pushing things, and at this scale it will be incredibly difficult to do.
> Out in the open with frequent updates.
Just to be clear, I have absolutely no issue with anything DFV (who I assume you're referring to) has done in this situation. But DFV is not the entirety of "retail" that could have crossed a line here.
> "fuck these guys for going all in on destroying a quality company for no reason other than the lulz."
Lol I'm not even going to respond to this.
Where is that done? I think you’re confusing everyone’s ‘this is not financial advice’ shenanigans with “this is not illegal.”
"Investors and prospective investors should be cautious of rumors on chat rooms where the intent of nameless and faceless computer users is in doubt."
So it'd be a question of which is it? Is it don't trust internet forums or is it people shit posting memes is a coordinated attack?
Logically and morally you can't have it both ways. But we're seeing how morals don't matter when you go after the money.
That statement is just advisory for investors to 'be cautious'.
Straight from this post ...
> This is not fraud. There is no manipulation here. We aren’t forcing anyone to do anything. It’s going to happen with or without us. But I want to ride.
Joking aside, the "we just like the stock" "this is not financial advice" stuff is as much a defence as the Someone Who Isn't Me thing I remember seeing on drug-related forums years back. You feel like it's protection because you're not getting prosecuted for admitting something you know is at least in the ballpark of law-breaking, but in reality you're just small-fry that nobody cares about. The moment a big-time dealer is under the spotlight, no amount of SWIM is protection.
I don't expect anyone from WSB to receive repercussions for this, but afaik this is dangerous legal territory and their defensive phrasing is a facade.
It was a perfect set-up for a historical short squeeze if the right catalyst came along. And that catalyst wasn't simply the people on WSB, there were other catalysts such as the Chewey founder coming in, and then earnings reports.
Once those factors played out, the people who noticed the precarious position the hedge funds had put themselves in got to watch their exact predicitions come true.
I don't see how that can be confused with a pump-and-dump scheme or any sort of market manipulation.
The main hedge fund known for shorting GME already had to sell a major stake in their company for 1.5 billion to survive last week.
[1] https://www.investopedia.com/ask/answers/06/shortedstock.asp [2] https://financhill.com/most-heavily-shorted-stocks-today
A fund could short from $10 and cover $100 to lose $90...then short again at $300 and now the price is $200. Short interest would remain the same but they'd be up $10 (with having spent more money on the borrow cost at $300, of course).
Short interest is not enough to know how damaged the funds are. As a matter of fact, since these hedge fund employee the smartest people in the world (supposedly?) it would not surprise me if they are taking advantage of the GME sentiment and profiting from this sentiment.
If you check this... GME is still way over 100%. That means the game isn’t over yet.
You can find it yourself easily.
I imagine GameStop, if their management is up for it, wants to create the expectation that their new true value is greater than their value a month ago and less than what it is now. If they can issue new shares at the difference and revitalize their company perhaps something meaningful could come from this for them.
This is definitely a part of GME as well, I think, the nostalgic attachment. If it wasn't specifically Gamestop, which is kind of a meme in of itself, would it have taken off like it did? I'm not so sure
IMO, it’ll be hard to do such a short squeeze ever again as the institutional investors know the repurcussions.
Some of the sentiments from comments are literally just "these guys thought Gamestop was dead? fuck them, we won't let it die"
Not sure that we should be sad for people who get burned by this... play stupid games, and you will win stupid prizes.
What you're describing sounds like a nice niche business model for a less austere time.
Now would certainly be the time to accelerate their plans to move more to eccommerce from brick and mortar, and re-adjust what the stores are selling from video games themselves to hardware (read: consoles, accessories, PC gamer parts et al)
They could sell additional shares into the market to raise money to fund projects and pay off debt, but this is a double-edged sword. The SEC might not look favorably on them doing this (read what Hertz did during the reddit craze there during bankruptcy) since it could be construed that they were taking advantage of the whole situation. Also, releasing new shares into the market could unwind the squeeze scenario trade by providing more liquidity to the shorts to cover at lower prices and dilute the amount of existing shares driving the price down.
Because of this they've probably been dead silent realizing that anything they say is going to drastically move markets.
Gamestop is in an interesting situation here from a management perspective - I'd love to be a fly on the wall in their board room right now. This will be an MBA case study for many many years.
There will be suckers. We just haven't hit that point yet.
I keep seeing stuff like this but I don't understand the motivation. What would a rival to the US have to gain by bankrupting a handfull of US hedge funds?
The text part of a self-post on reddit can be edited by the OP even after the thread gets archived, and you can see from the asterisk that this one has been edited.
I'm not sure if reddit exposes the "last edit date" anywhere, maybe in an API?
The other way would be to look at an internet archive snapshot.
This post was last edited 4 months ago.