‘Meme stock’ rally rescues AMC theaters from $600M debt
polygon.com
polygon.com
https://www.barrons.com/articles/amc-entertainment-investor-...
I was a member of /r/WallStreetBets for several years. It was fun to joke around and talk quant stuff in some of the comment threads before it devolved into pure memes.
Recently, I commented on a few of the front-page threads to correct some misinformation. They banned my account within minutes. They don't want to see any comments that don't support the pump.
At this point, they're heavily moderating the sub to only allow posts and comments that glorify $GME. The only allowable content is that which insinuates anyone who buys $GME is about to get extremely wealthy, or that everyone buying $GME is sticking it to Wall Street.
The situation has gone from funny to scary as Redditors are pouring money into $GME with expectations of getting rich and taking down Wall Street at the same time. Subreddit moderators have no interest in letting any comments through that might spoil the party before the early $GME buyers can exit their positions.
Over on WSB they're going nuts claiming that 5k isn't a meme.
The banks aren't holding until then. If they decide to offload at, say, 600, then retail will be left with the bag since the bank selloff will drop the price down dramatically.
That's the claim as I've seen it made on the /r/stocks subreddit.
I have a lot of shares. In at $17. I'm not sure what to think. I've already taken out 5x my initial investment. I've been doing as much research as I can to determine how high this could go, partially for my own benefit, but I also want to "hold the line."
Who knows what would have happened had RobinHood and others not shut down buying. I'm pretty sure I would have retired.
This is another misconception: Robinhood didn't exactly choose to shut down buying. The extreme volatility required significant extra collateral to be posted, which Robinhood probably didn't have the money for. This is why they had to do an emergency raise of a billion dollars and draw down their credit lines.
Robinhood also makes all accounts margin accounts by default. They try to hide the fact that trades don't settle until T+2 days by making the margin invisible to the end-user, but it still draws down their credit. Robinhood Instant [transfers] also consume margin while they wait for incoming bank transfers. Without an infinite supply of credit, it just wasn't possible to allow unlimited buying (margin buying in most cases, due to T+2 settling or bank transfer delays) of GME stock.
Congrats on the value of your shares, but I would implore you to come up with an exit strategy. Even /u/DFV has been slowly taking money off the table during this entire run-up. Don't let yourself be one of those people talking about how you had a paper gain of a million dollars for a brief moment in 2021 before you lost it all.
I've also taken out 5x my initial investment. I've been trying to minimize exactly that kind of regret along the way.
I would love to hold and see it going to the moon but I will likely have a few limit sell orders open before monday morning.
It's possible in theory, but very unlikely in practice.
A short squeeze is a very temporary event. Once it's over, the share price will begin to decline quickly. Anyone left holding shares on the way down will lose their money. Moreover, if they only joined to squeeze the shorts, they'll lose their purpose. Despite what the memes say, they'll absolutely start selling when it looks like there isn't any more money to be made.
WSB presents an extremely over-simplified version of the stock market. They look at graphs of short interest and assume that no new short positions have been opened since this started. In reality, hedge funds are likely closing and opening short positions all day, every day. They're trying to push the idea that total short interest is a valid indicator of when the squeeze has started, but it's not valid at all.
Frankly, the level of misinformation coming out of WSB can no longer be attributed to Redditors having fun making memes. They deliberately remove comments and accounts that don't toe the line or pump the stock. They deliberately push flawed ideas to convince newcomers to buy more shares. They're pumping the stock, and the early GME buyers will take advantage of the pump by dumping their shares. It's basically a pump-and-dump at this point.
Matt Levine saw the Citadel order flow (so Robinhood investors' orders) over the past week[1] and, contrary to what you'd expect, there were only more net buy orders than sell orders on Monday. Every other day, there were more sells than buys, to end the week overall at about a 1:1 ratio.
What to make of this? I think that this is pretty clear indication that early WSBers (who got in at sub-100) are smartly taking their profits and running. What we're going to see at the end of the day is a pretty significant wealth transfer, but unlike what the news is parroting, it is going to be a wealth transfer from the starry-eyed lowest rungs of society to the upper-middle class and large institutions who have gone long on GME. When those driving the narrative on WSB and the Wall Street trading desks exit, the mom and pops who heard about this on the morning news and got in at 200+ are going to be left holding the bag.
[1] https://www.bloomberg.com/opinion/articles/2021-01-29/reddit...
many are also not caring for expecting to get rich
It seems like a few short-selling banks will take a beating, more banks will make a killing, and a lot of Redditors are going to die on the cross of “diamond hands.”
I don’t really know anything about the stock market though. This is interesting enough to watch from the sidelines.
It's fun to watch but quite sad at the same time
some benefit (Vanguard Group, SIG, Semvest Mgmt, MUST Asset Mgmt, BlackRock, Fideility Investments, Dimensional Fund Advisors, Maverick Capital) also Micheal Burry as well
it is more of a message for that - the power of the commoners can take down a few elites.
for some, it is to be part of the history
Where does this paternalistic attitude come from? Do you go an lecture people throwing money at the craps tables?
People on WSB certainly know this is no different than gambling. There is a reason loss porn is a thing. The entire sub mocks the seriousness of “real investors” who have big accounts and pretend they are gambling by reading a blog about the number they pick on the roulette wheel.
I could be in my most empathic state after a heavy acid trip and still wonder where this unnecessary paternalistic attitude comes from
what do you guys want to happen, another paragraph added on page 73 of the regulatory disclaimers?
I don't know how realistic that is, but the message is certainly powerful.
That means you’re there to gamble. You can’t waltz in expecting 1000% returns in a few days and pretend you’re not gambling.
But there's about 5 million new people subscribed to that sub in the last couple weeks, and I don't believe they all know holding GME is gambling.
Even on WSB the posts are very much about it being a batte that has a potential of being lost. There is no pretense of GME being an investment that only goes up or that GME is some up and coming company.
As far as I'm concerned, folks on this board who haven't at least once spent critical money for a passion are completely out of touch with the everyday realities of working class life.
Amen to that!
day trading has always had -EV :)
I think plenty of people recognize that it is a bubble, but they are planning on offloading to the bigger fools.
I think most people are just trying to make money and a bubble is a great way to make money. Until it isn't.
It has been interesting to watch the WSB narrative shift over time. It's a real-time experiment that optimizes for the best messaging to convince casual Redditors to put their money into stocks in ways that benefit earlier WSB members.
At this point, they've convinced a lot of people that buying $GME at obviously inflated prices and never selling it is somehow an altruistic move to take down all of Wall Street that might also make them so rich they can retire early. Of course, it should be obvious that no one is going to get rich by never selling the stock, but that message gets buried among the memes.
It was fun to watch at first, but now it's just sad to watch so many people pour real money into something that won't generate the outcome they've been promised.
Also, vast majority of WSB users (at least up to the last few days) are buying GME not to profit (according to their own words).
And all these events obviously will leave a large mark on stock market and probably introduce some new regulations which is a good thing.
But also, the subreddit is trying to weaponize anger against Wall Street for the 2008 crisis into a generalized anger against all hedge funds and investment firms, regardless of whether these firms are actually guilty of anything. Melvin Capital didn't exist until 2014, but it doesn't matter. They're automatically guilty because they're a hedge fund. People on WSB are telling stories about how their families suffered in 2008 and therefore they are never going to sell their GME stock.
WSB mods are deleting posts advising against holding GME. There is a pretty concerted effort on the subreddit to get people to buy more GME and to hold. And the people that do so are going to be the ones holding the bag when the bubble ends.
If you're cynical, you might wonder if redditors are the "mark", and some of these posters are intentionally trying to screw them out of their money. Regardless, the idea that this specifically hurts the people that caused the financial crisis is unsubstantiated.
Anyone can take out a short position. It's only marginally more complicated than buying a stock. Plenty of retail investors are taking short positions, too.
More importantly, the idea that short interest only goes down is a mistake. Anyone, retail or institutional, can close out a short position and re-open a new short position at a higher price. Total short interest remains unchanged, even though earlier shorts have been closed out.
This reminds me of a poker analogy: if you sit at a table and do not recognize the idiot at the table, it's you
On the surface, yes, but they've also been fed a lot of misinformation about how they're more likely to get rich than to lose it all. They think the odds are stacked in their favor, but that's definitely not true for the late entrants.
> Also, vast majority of WSB users (at least up to the last few days) are buying GME not to profit (according to their own words).
WSB isn't a democratic subreddit. They will downvote or remove any posts or comments that don't support the pump. They upvote any post or comment that encourages people to buy stocks they own.
It's a pump group. They gain financially by pumping the stock. They'll gladly upvote any narrative that encourages more people to pump the stock.
> And all these events obviously will leave a large mark on stock market and probably introduce some new regulations which is a good thing.
This topic keeps coming up, and I keep asking people: What regulations do you want? Or expect? Specifically, what regulations would help here?
If anything, we're going to see more regulations on retail investors after we see how vulnerable they are to falling for mass pump-and-dump schemes with the widespread availability of margin accounts.
WSB had millions of people join the subreddit in the past week (~5m). If each held an average of 5 shares, that'd be 25m shares. There are only 69.75M shares outstanding.
https://finance.yahoo.com/quote/GME/key-statistics?p=GME
There are 46.89M shares in float (i.e. are readily available).
On January 15 2021 61.78M shares were shorted. This is matched here:
https://shortsqueeze.com/?symbol=GME&submit=Short+Quote%E2%8...
At that point WSB started piling on and millions of shares went into call options and / or were purchased - by retail investors OR people who frequented WSB.
Remember, hedge fund managers and what not also visit and contribute to WSB. There is absolutely no reason to assume a given institution isn't also in on this (and effectively collaborating).
Anyway, how much of it is institutional? I'm unsure, honestly doesn't matter.
By January 15 the float started being purchased and prices were rising. The short sellers started losing money and the hedge funds holding short positions likely expected things to reverse course, as a quick pump-and-dump.
That didn't happen. All the remaining float was then bought up by millions of retail investors; raising prices. Sure some of the hedge funds also sold during this point, but retail inexplicably kept buying (keeping prices high).
They also aren't going to sell for anything less than $1000+ and IT IS NOT ABOUT THE MONEY. Some may never sell:
https://www.reddit.com/r/wallstreetbets/comments/l6omry/an_o...
What does this mean? The short sellers double down hoping to wait it out.
Does this work? Maybe. After robinhood forced the sell off, we're going to see peoples transferred funds hit monday and tuesday. This is a middle finger to the hedge funds to these people. We're going to see the price go up... idk ho much, I'm guessing thousands.
People will surely sell, but if retail continues to hold (or buy at $200), the short sellers are still suck spending billions on interest and will eventually pay out. Sellers have little reason to sell for anything less than $10,000 or something crazy.
Now, did the short sellers get out? I'm not sure, but given how much everyone is freaking out - I am not so sure. I know "hedge fund bros". My bet is they are still holding or doubling down and it's about to get real very fast.
Second, the narrative that Reddit drove the short squeeze is mostly a lie that has been repeated over and over again both because it's cute and because people want to believe they have significant power. In reality, many institutions also saw this coming, and when they saw the WallStreetBets subreddit getting ready to pump (yes they watch Reddit), they also piled on. They've mostly done it quietly so as to not disturb the convenient narrative that this is a David vs Goliath story, but really this was driven by big money. It's just a nice side effect that a lot of early retail investors have made a lot of money as well.
And yes, it is absolutely true that the end result of this will be retail investors getting slaughtered. Especially because of all the hype on WallStreetBets and elsewhere, there is a LOT of dumb money in the market who have no exit plan, and their lunch will get eaten when the large institutions exit at the top and trigger a GME free fall.
https://news.ycombinator.com/item?id=25970538
That said, both are poor responses to the righteous anger that people feel, and one of the comments on the first article gets it right:
> The tone is that of Jeb Bush lecturing Republicans on why they need to elect an establishment, responsible republican. In and of itself it might be true, but it not only falls on deaf ears, it actually reinforces why people were inclined not to do so in the first place.
Not sure about exact pricing, but maybe they even profited: The volatility on puts has risen to insane levels.
What %? And what's a good source to verify that number?
This means that memes could really be an untapped trillion dollar industry if they’re able to drastically raise the social capital of damn near anything, which can be used for profit purposes.
I dunno, it seems like meme stocks are in that position because they're small-cap companies facing significant headwinds and either got overshorted or have enough brand recognition that retail investors seem convinced they'll survive. I'd rather not be in the position of facing the headwinds and hoping a bunch of suckers show up who will give me money.
What's funny is this is pointing out big holes in the "but it's 150% shorted" story. The retail buy/sell order flow seemed pretty balanced on Thursday according to Citadel, so there isn't much HODL. If the price holds for much longer, Gamestop can issue more shares, and holders of convertable debt are converting, likely selling the shares ASAP.
I guess they squeezed some shorts, some more shorts probably moved in, and some of the money goes to debt holders, and some might go to the company. Some of it makes for a good story, but I wouldn't be surprised if PE and hedge funds quietly come out ahead in aggregate.
Not sure I follow. The hedge funds are shorting the stock, debt holders are converting to stock, Retail (and plenty of big players) are buying and holding. 3 different parties.
WSB also seems to misunderstand the short interest. They're pushing the idea that short interest must start going down to indicate the squeeze has started. They're not accounting for (or deliberately ignoring) the fact that new short positions can be initiated at $360 which will be profitable when the stock inevitably falls. Reddit can't keep the stock high forever with a never-ending stream of buyers. That's why they've now shifted to pushing the narrative that everyone should buy and hold $GME to hurt Wall Street, which isn't really true either.
WSB is also pushing the narrative that everyone is holding (or hodling) $GME shares and refusing to sell. This is perhaps the strangest claim of all, since it's so easily debunked by looking at the huge daily volume of shares traded. Shares can't be traded unless a buyer and seller agree on a price. The volume is extremely high, which means plenty of people are selling their $GME all day every day.
WallStreetBets has devolved into a blatant pump-and-dump megaphone.
> Reddit can't keep the stock high forever with a never-ending stream of buyers
If keeping the price high is dependent on a never-ending stream of new buyers, you've devolved into a ponzi-scheme.
The fact that retail brokerages temporarily limiting new buyers "caused the price to crater" speaks at least a little bit to this interpretation as well.
Not buyers, holders. The buyers are guaranteed for a while due to the short interest.
> The fact that retail brokerages temporarily limiting new buyers "caused the price to crater" speaks at least a little bit to this interpretation as well.
It cratered and then rocketed back up within the hour. GME has been super volatile and yeah, cutting off the people interested in buying is going to temporarily lower demand which lowers the price, no surprise there.
Also, can anyone explain to me why there are so many short positions rather than just buying puts?
Short squeezes are short, temporary events. Even with borrow fees in the range of 30-50% (per year), it's a small price to pay for a short-term play. It's not realistic to expect the general public to continue pouring money into Gamestop stock to keep the price propped up.
Keep in mind that shorts can also exit and re-enter their short positions with high frequency. Not all of the shorting activity is long-term shorting that started <$10
And of course, the original Melvin Capital claims to have exited their original short position. WSB wants us to believe they're lying, but I'm inclined to believe them.
However, consider this: If this short squeeze was as easy as WSB wants you to believe, why didn't a well-capitalized hedge fund cash in on it already? It's not like WSB planned this in secret. It was literally headline news on a top-10 website for weeks.
As you said, the hedge funds are certainly making a lot of money here. Early investors are making a lot of money. However, we don't actually know how many of the short positions entered at $2 or $200 or even $400. Smart hedge funds will make a lot of money by taking short positions on this stock, selling their borrowed shares to Redditors looking to get rich, and profiting by exiting their short positions when this finally crashes. Those shorts will cause the "short interest" number to stay high, or even increase, as this situation goes on.
I would be surprised if there aren't already multiple hedge funds doing just that.
I feel like this should have led to more interesting problems already.
Like, suppose there is a company which is going down the drain and two of its competitors are willing to pay a few peanuts for its carcass and nobody else wants it at all. It's e.g. 50% shorted, so they each end up buying 51% of the company because 102% is less than 150%. What happens now?
> They're not accounting for (or deliberately ignoring) the fact that new short positions can be initiated at $360 which will be profitable when the stock inevitably falls.
That's still a risky bet given the amount of media coverage this story is getting. The volatility of that stock right now is absurd. And if it goes high enough, even shorts who got in at a crazy price could get busted by an even crazier price.
> Reddit can't keep the stock high forever with a never-ending stream of buyers.
It's a war of attrition at this point, isn't it?
You have the shorts who would really like to wait until the price crashes before closing their positions, but the higher the price goes the more collateral they need to continue shorting the stock. So they end up having to borrow money from people willing to risk losing it in exchange for (presumably) a high interest rate. If the price gets high enough for them to run out of willing creditors, they go bust and anybody who tried to bail them out loses the money they put in.
On the other side is everybody who is holding the stock and is going to keep hyping it until that happens, because if there is a short squeeze they make a mint but if it crashes first then they end up eating it instead of the shorts.
Anybody who thinks they know who is going to come out on top has a better crystal ball than me.
It's not; its EPS is negative: https://finance.yahoo.com/quote/GME?p=GME
Never underestimate how much money people are willing to spend just to fuck over other people ("hedge funds") or to get rich quick.
Corrections are coming.
And not only for marketing, memes are a powerful tool used by agencies and governments for propaganda.
One thing that coronavirus has taught us is that the whole capitalist system depends on constant flow of rents, loan payments, bond payments, and so on and if that flow is interrupted, the whole system has a heart attack and panics. You can’t just pause capitalism, there are all kinds of contractual payments that have to be made. In that way it’s actually much less flexible than, say, a planned economy.
But I hope amc survives.
A financial move in a crazy situation.
Converting debt-to-shares is an equivalent.
Company wins, Redditors lose.
That's the crazy thing about all this. The stock isn't worth $30, let alone $300. This will all come crashing down, and the most naive later investors are going to be left holding the bag.
The guy bagging my groceries yesterday told me he used his stimulus money to buy GME on RobinHood. That guy is probably going to lose that money to the guys that cash out first.
> issuers must ensure compliance with the federal securities laws for any contemplated offers or sales of their own securities.
Does anyone know what that means?
Both it and The Verge are nothing like they were when first launched, but anyway that's off-topic.
This is a pump-and-dump. Probably one of the biggest I've ever seen.
Seriously, the "meme economy" and "meme stock market" has become a reality in 2021. Nothing is off the table in this reality anymore.