TheGuardian:
The coronavirus pandemic hit GameStop hard. Like many retailers, already suffering from the shift to online sales, the video games chain is losing money and plans to close 450 stores this year. And yet, surprisingly, GameStop has become one the hottest stocks of the year.
The 37-year-old chain store group is now the focus of a David-and-Goliath battle between an army of small investors and Wall Street that shows no signs of abating and has highlighted some fundamental shifts in investing.
Last April, when the company announced mass closures, GameStop’s shares (GME) could be bought for $3.25 each. On Tuesday they soared another 92% to end the day at close to $148, pumped up again by small investors hoping to ruin Wall Street bets that the price would crash. It’s a bet that has, so far, proved very costly for the professional financiers.
The strange saga of GameStop’s cult status can be traced back to last September, when Ryan Cohen – investor and founder of the online pet food giant Chewy – took a 13% stake in the retailer and started lobbying for it to move more of its business online and become a serious rival to Amazon. Cohen and two associates were added to the company’s board in January. more here
Interesting. I have been following the story today, and actually a friend had posted about it on the 13th, but I didn’t have the full story.
I could see the argument that Cohen was steering a failing company into a new industry, I can see the potential there although risky. The Reddit-driven explosion the past couple of weeks is ridiculous though. Like the housing bubble some will win big and some will lose big. I happened to have a conversation today with a professional investor and mentioned it to him. He said to expect more like this – and that it will likely lead to a loss of confidence in the market.
Do not buy thin boat anchor.
If you own this stock, sell it NOW. They are Done. Take this stupidity as a one time lottery ticket and SELL.
What reddit and some idiots have done is STOOOOPID.
This is going to end in Robinhood tears.
This is just one, but there will be more and it will harm the market.
A savvy investor could definitely do well though, using excitement and naivete of the Redditors and their ilk to his advantage. A friend is working the options. I tried to short a few shares today but there are none available.
Thw government is going to step in and “fix” the problem, to the detriment of small traders and to the benefit of hedge funders and Congressional inside traders. I shudder to think of what the Marxists like AOC and the RONOs like Romney will saddle us with.
It all started by buying out of the money calls that expire in a short time (a week) for pennies by the hundreds of thousands. The options clearing house needs to then purchase a percentage of shares to be able to deliver those shares should the stock price go up to the strike price. This raised the price, causing short sellers to cover their position and buy the stock, that made the price go higher even more. That led to more speculation buying more option contracts, and it repeats in a feedback loop.
The speed in which this happens can only happen with stocks that have a heavy short position (some stocks have more than 100% of shares shorted). If you have enough people buy options contracts for literally pennies this is possible, and those people stand to make a boat load of money or lose only a couple hundred bucks. Each options contract is for 100 shares, and you could get deep out of the money contracts for 2 or 3 cents. 15,000 contracts for $300 bucks, for example, that represents 150,000 shares. When enough people do this the options clearing house needs to buy the shares or they are caught unable to deliver at expiration of the contract. This pinched the bastards that run hedge funds, and hilariously so. They got beat at their own game.
It’s how TESLA has gone so high over the years, people buying out of the money calls en masse. Gamestop is just an accelerated version because the hedge funds were deeply short and were caught naked without anything to cover the positions should the trade go against them.
Something else. This happened with AMC today. I’ve been killing myself today for having sold my calls in AMC yesterday, a day early. I stood to have made a LOT of money today for only a couple hundred bucks risk. Instead I sold yesterday for a measly $150 gain. I need someone to kick my ass, I’d feel better.
I forgot about the multiplier in my above math, you can knock 2 zeros off that. 2 cents would be $0.02 x 100 or $2 per contract. But you get my point.
At the end of the day it’s nothing but a game of musical chairs. When the music stops, some people win and some people lose.
wow. It could be the plan as mentioned above is to crash confidence in the market itself. Remember what Ann Barnhardt said when she left the ag futures market. No confidence, and she was brilliant at making money there too.
One of the smartest things I ever did was to get my kid interested in investing at an early age. Last week he comes to me asking for advice on just this stock. He has a couple buddies at work, a biotech lab in the Bay Area, who actively trade this stock. As with many neophytes in the market, he suffers from FOMO (fear of missing out). We’ve had a few talks already, discussing short squeezes, the greater fool theory, the dot com bubble, even the Dutch Tulip craze 400 years ago. I hate the term “teachable moment” but GameSpot, and similar stocks that trade on emotion and not fundamentals, they are going to bring much misery and pain to those unaware.
@Thirdtwin, you are absolutely right, the hedge funders and the big financial institutions owns the federal government, both sides. At present they can afford to settle their shorts at a loss, but if the stock continues to rise, they won’t be able to bail so naturally they will get their pocket politicians to “fix it” for them.
Blah Blah Blah, I love it. More please, the purpose in this is a lesson. I support it. I see these as folks as heros.The people doing this are going to lose money, for their point!
Read the open letter by those who started this! They do not care about the money.
Heros! Hedge funds are grave robbers.
This is beautiful!
Trump’s army of smarties. Shedding light on the cockroaches of wallstreet.
They choose gamestop for a reason. Gamers indeed.
Sorry if you lose your retirement…but why are people so fucking ignorant? This happens all the time, only fat cats controlled the outcome.
THAT IS THR POINT!
Anti-Trump nonsense had to be thrown in at the end of article.
The hedge funds got greedy and shorted 135% of the stock in GameStop with the intention of driving the price to $0 and walking away. Of course, you cannot borrow to short more stock that exist. That would be naked shorting which, unless you have special privileges with SEC, is strictly forbidden. Of course, the major hedge funds are allowed this privilege. An online group of retail investors or traders noticed the situation and started buying the stock with the intention of holding and driving the price up. News spread and now there are some 3.5 million players paying attention to the long side. Yesterday, Elon Musk noticed the party and tweeted that he bought calls. To add further price, other hedge funds have noticed the short squeeze and started piling in. In the end, a small group of hedge funds, who have lost a few billion already, may end up busted. Or, they may manage to drive the stock down with the help of CNBC, Fox Business, and other shills for big money. It’s an interesting situation but, not likely, the end of the market.
If you are interested, this YouTube channel has some recent videos from one of the “investors”
“Diamond Hands”
Whoops, forgot to post the channel – https://www.youtube.com/watch?v=DdpVzzXWOTA&t=4s
TR: I thought the issue she left about was related to the MF Global crime that no one in the Obama administration was going to prosecute because they originally wanted the guy at the head of it to be the Treasury Secretary.
I could’ve bought into this a few weeks ago but didn’t and now I’m kicking myself over it.
I’ve never invested before so I’m super bladder shy about it. Still. I could’ve made something out of nearly nothing and god knows I need the money.:b
Anyway this is GOOD. Croney capitalism and hedge funds are an issue. This sort of stuff wouldn’t even be a problem if not for them so who is the real danger here? Not the redditors or the regular people buying up gamestop shares.
Could be the springboard Nancy was looking for. The Federal takeover of our retirement accounts. She’s said at least twice in the past that the stock market was unsuited for the average person because it was too easy for those of us in the unwashed masses to make poor investments and lose money. With government backed investments the money was secure; blah, blah, blah. It’s transparent that it was nothing more than an attempt at a huge money grab. The last number I saw was that there was $30 trillion in investment accounts. They salivate thinking about what they could do with that.
Remember, never waste a good crisis. You think the media will help them designate this as a crisis?