Cryptocurrency

[Franko]

Anyone want to explain in lay-mans terms what exactly is going on with gamestop

The hedge funds were playing games with their shares and the fans got together and stopped them?

Firstly, it's a pretty shit company – think blockbuster or Xtra vision.

But that's largely irrelevant

Their share price had been dropping consistently for a long time and a few hedge funds had taken large short positions on them (betting that the price will fall further)

So much so, that the company gained a bit of notoriety as being the most shorted stock in the world.

A bunch of geeks on reddit saw this and decided to take action (for kicks more than anything - they didn't care a jot about the company itself)

So they, and all their friends, and all their friends' friends (x10) started to buy the stock – sending it rocketing (+over 300% in a few days)

If stories are to be believed, one hedge fund is on the verge of collapse due to the size of the losses (over $1bn)

And most of the guys who got in early are absolutely quids in (on paper)

So in essence, a bunch of normal folks have gotten organised and plundered a billion dollars from a hedge fund

Which is a helluva story, if nothing else

[gallsman]

The Redditors aren't buying the stock, they're buying options using retail platforms like Robinhood and Ameritrade as the leverage is much greater.  The sellers are then buying stock to hedge, which drives the price up and as the price goes up, the short sellers have to buy stock to cover their position which...drives the stock up further

Something like 140% of the stock was in a short position. Mental.

So in essence, a bunch of normal folks have gotten organised and plundered a billion dollars from a hedge fund

Which is a helluva story, if nothing else

Not quite - the redditors are getting their tasty returns, assuming they sell their options (there are screenshots of people paying off mortgages) etc. The biggest winners though are the hedge funds that get to buy into the otherwise sound and successful fund that got melted for bargain basement price. The losses there are going to be considerably more than 1bn.

[Franko]

Sorry I was going more for the lay man explanation

Anyway

The page on Reddit has been taken down for "hate speech" apparently.

The hedge funds are fighting back

[trileacman]

There's certainly a question of legality to what the Redditors are doing. Does the event not simply boil down to an internet-inspired pump and dump?

[TwoUpTwoDown]

Anyone want to explain in lay-mans terms what exactly is going on with gamestop

It's a bit like the time John and Zeus took down Hans Grubers brother in New York. Completely unexpected but great to see.

The hedge fund pricks are being nailed by Peter Lafleur and the lads.

[TwoUpTwoDown]

There's certainly a question of legality to what the Redditors are doing. Does the event not simply boil down to an internet-inspired pump and dump?

I don't know if there are genuine legal issues at play. As mentioned previously here, for me the issue is the actions of the hedge fund groups in the first place.

[StPatsAbu]

What the fcuk is this Gamestop schit about? Explain in layman terms.

[Ball Hopper]

Shorting a stock is actually buying it and promising to return it inside a certain amount of time.  The borrower then sells the stock.  When done by a large hedge fund, they usually release a damaging report (but fully legal) after they sold the stock detailing why they think the stock is overpriced.  Wall Street traders believe the bad news and the stock price drops accordingly.  Hedge fund then buys the stock back at the lower price and returns the stock to the original owner.

Example: 

Jack has 100 shares in XYZ company that he bought at 50 bucks and he wants to hold for years to come.  XYZ is trading at 100 bucks per share today.  Hedge Fund A makes an agreement with Jack to borrow his shares for 1 month and pays Jack a dollar per share.  That means they actually buy his shares for 101, including the fee and promise to return his 100 shares in a month.  Hedge Fund A immediately resell the 100 shares for 100 bucks.

After Hedge Fund A sell the shares at 100 apiece, they release a report as to why they think stock is overpriced.  This could be based on expected cash flows, industry sector outlook or any plausible sounding reason (plausible to fellow traders anyway).  The intent is for the report to be the basis for a drop in the price of XYZ stock.  Let's say the stock drops to 80.  Hedge Fund A buys 100 shares of the stock at 80 and returns the shares to Jack. 

Since Hedge Fund A sold the shares at 100 originally and re-bought them at 80, a clear profit of 20 for them.  The only other expense was the 1 dollar per share fee they paid Jack to use his shares for a month.

Great deal for Jack as he could do this for 50 months in a row and have the shares at no cost and every month after that he'd be making gains and still own the shares at the end.

Great deal for Hedge Fund A as they made 19 per share profit.

Not so great deal for whoever bought the shares from Hedge Fund A at 100 per share before the report, conveniently authored (but perfectly legal as all they are doing is giving an opinion) by Hedge Fund A.

It is exactly the opposite of a Hedge Fund buying a stock and releasing a positive opinion, then selling - that would be pump and dump.

This guy has very good videos on market stuff.  He is Patrick Boyle, Boston born but raised in Ireland and a product of Trinity University, Dublin.  He is a fund manager, a professor of finance and an author. 

This is his 15-minute take on the GME and Wall Street Bets over last few days.  https://www.youtube.com/watch?v=Qi5hTqQFhuA

[gallsman]

There's certainly a question of legality to what the Redditors are doing. Does the event not simply boil down to an internet-inspired pump and dump?

There is an element of coordination alright but that's been going on since the first days of trading. It's no different to tipping a stock and the person you tip passing it on to someone else and then someone else etc. It manipulates the price for sure (pretty much everyone agrees that GameStop is failing and the shorts held by all the funds were the right thing to do from their perspective) but as Ball Hopper says, institutional investors manipulate prices all the time. The difference this time is the scale and the quick, easy access retail investors now have to trade various financial instruments at no or zero commission.

As always though, those last in and those who don't jump out in time will be the ones who get burnt. Thankfully as they're largely (from what I've read) buying call options rather than the stock outright, they'll only stand to lose the price of the options, do hopefully the number of people who lose their life savings roll be relatively few.

[RedHand88]

Alot of those stocks being blocked by the exchanges. So much for the free market!

[Tony Baloney]

Alot of those stocks being blocked by the exchanges. So much for the free market!

Just watched Dave Portnoy calling for people to be jailed!

[trileacman]

There's certainly a question of legality to what the Redditors are doing. Does the event not simply boil down to an internet-inspired pump and dump?

There is an element of coordination alright but that's been going on since the first days of trading. It's no different to tipping a stock and the person you tip passing it on to someone else and then someone else etc. It manipulates the price for sure (pretty much everyone agrees that GameStop is failing and the shorts held by all the funds were the right thing to do from their perspective) but as Ball Hopper says, institutional investors manipulate prices all the time. The difference this time is the scale and the quick, easy access retail investors now have to trade various financial instruments at no or zero commission.

As always though, those last in and those who don't jump out in time will be the ones who get burnt. Thankfully as they're largely (from what I've read) buying call options rather than the stock outright, they'll only stand to lose the price of the options, do hopefully the number of people who lose their life savings roll be relatively few.

There's a difference between giving someone a tip and coordinating a bull run on stock but I see where you're coming from. I've no involvement in finance but I don't understand the desire/delight at seeing short-sellers getting burnt. At the end of the day they are simply betting a stock is going to fall. I don't see how this is any more immoral than buying shares or options and betting they are going to rise (unless you're an idiot who believes stocks should simply only ever go up).

The people involved in this are just playing the stock market game. The Redditors and hedge funds are simply trying to manipulate the situation to make money. The Redditors are not heroes and the hedge funds aren't villains. Not unless you consider altruism to be the greatest virtue in which case they're both dicks.

[Main Street]

There's certainly a question of legality to what the Redditors are doing. Does the event not simply boil down to an internet-inspired pump and dump?

There is an element of coordination alright but that's been going on since the first days of trading. It's no different to tipping a stock and the person you tip passing it on to someone else and then someone else etc. It manipulates the price for sure (pretty much everyone agrees that GameStop is failing and the shorts held by all the funds were the right thing to do from their perspective) but as Ball Hopper says, institutional investors manipulate prices all the time. The difference this time is the scale and the quick, easy access retail investors now have to trade various financial instruments at no or zero commission.

As always though, those last in and those who don't jump out in time will be the ones who get burnt. Thankfully as they're largely (from what I've read) buying call options rather than the stock outright, they'll only stand to lose the price of the options, do hopefully the number of people who lose their life savings roll be relatively few.

There's a difference between giving someone a tip and coordinating a bull run on stock but I see where you're coming from. I've no involvement in finance but I don't understand the desire/delight at seeing short-sellers getting burnt. At the end of the day they are simply betting a stock is going to fall. I don't see how this is any more immoral than buying shares or options and betting they are going to rise (unless you're an idiot who believes stocks should simply only ever go up).

The people involved in this are just playing the stock market game. The Redditors and hedge funds are simply trying to manipulate the situation to make money. The Redditors are not heroes and the hedge funds aren't villains. Not unless you consider altruism to be the greatest virtue in which case they're both dicks.

The hedge funds are taking a gamble that the stock value will drop, but it is their actions that will ensure the drop in stock value.
In itself, even a significant drop in share value does not destroy a company but it can seriously impact it's ability to get out of their hole. That's immoral  and is illegal but just not scrutinized. In any case they are still the scum, Deutche Bank type scum. Afaiu, despite their 2 year losses, Gamestop is still operating at some viable level and could conceivably adapt their business.

In this case Hedge funds get totally carried away on a wave of avarice and seek to short more than 100% of Gamestop's shares, they borrow the shares at $10 and force a drop in value to $4. Then the plan was return the shares and pocket the difference in value. Smart plain folk sussed out their Achilles heel and intervene to 'purchase' the shares at the low value  and they are the ones accused of  "market manipulation". Afaiu  after the smart folk took their options at $4, the share price went up radically, the Hedge funds in the end will be forced  to cover the difference between their borrowing price $10  and  new much higher value of the shares.

[gallsman]

They don't just bet that the stock goes down though. They actively try to force it down.

Alot of those stocks being blocked by the exchanges. So much for the free market!

Just watched Dave Portnoy calling for people to be jailed!

He might not ultimately be wrong, but Portnoy is a gobshite of the highest order.

[GJL]

There will be a Hollywood blockbuster made about this story.