Gamestop?

[Music Lover]

Likely true, as Wall Street and their lobbyists are skilled at privatizing wins and socializing losses. Still, if the free marketeer hedge fund titans start wailing for government protection, I hope Congress ties it to the end of the Carried Interest Loophole and other curbs on abuses and preferential treatments.

The only rules that will be changed are the ones that allowed this to happen in the first place. It's always been a rigged game, just like Las Vegas...if you win too much even legitimately you will be banned from playing.

The house always wins.

 

[dadu007]

As the person who resurrected this thread, I originally said I was long GME, but obviously it morphed in to uncharted territory. I bailed on Tuesday, a day too early as it turns out, but I cleared enough $$, after taxes, for four years of college for one of my sons. The result of watching it unfold with all the volatility, the halts, the real-time test of my own risk tolerance, and then (after I was out) the trade restrictions, is a whole range of emotions: Regret knowing I could have made 4x as much (greed), then thankfulness that I got out with a significant gain which will be put to good use (gratitude), and lastly, sadly, a conviction that the market is rigged against the little guy (schadenfreude against the hedge funds).

 

[Koolau]

As the person who resurrected this thread, I originally said I was long GME, but obviously it morphed in to uncharted territory. I bailed on Tuesday, a day too early as it turns out, but I cleared enough $$, after taxes, for four years of college for one of my sons. The result of watching it unfold with all the volatility, the halts, the real-time test of my own risk tolerance, and then (after I was out) the trade restrictions, is a whole range of emotions: Regret knowing I could have made 4x as much (greed), then thankfulness that I got out with a significant gain which will be put to good use (gratitude), and lastly, sadly, a conviction that the market is rigged against the little guy (schadenfreude against the hedge funds).

YAY! We have a winner here on the ER Community!

I'm impressed with your summary of your learning points. The one about the game being rigged is sad because it's still the only game in town.

Good on you!

YMMV

 

[NW-Bound]

As the person who resurrected this thread, I originally said I was long GME, but obviously it morphed in to uncharted territory. I bailed on Tuesday, a day too early as it turns out, but I cleared enough $$, after taxes, for four years of college for one of my sons. The result of watching it unfold with all the volatility, the halts, the real-time test of my own risk tolerance, and then (after I was out) the trade restrictions, is a whole range of emotions: Regret knowing I could have made 4x as much (greed), then thankfulness that I got out with a significant gain which will be put to good use (gratitude), and lastly, sadly, a conviction that the market is rigged against the little guy (schadenfreude against the hedge funds).

Congrats on getting out with a good gain. One must know not to push his luck.

These are not the stocks to buy-and-hold at the outrageous prices. I am sure we will learn about the late comers to the party in the days ahead.

 

[Running_Man]

Congrats on getting out with a good gain. One must know not to push his luck.

These are not the stocks to buy-and-hold at the outrageous prices. I am sure we will learn about the late comers to the party in the days ahead.

There is a misunderstanding of what is going on a massive scale. There is a float of 46 million shares of gamestop. If you have 4 million people participate they could each buy 10 shares and hold forever and the stock is going parabolic. There is nothing the shorts will be able to do, as the long term shareholders sell eventually you only have the participants with shares and then the price explodes up. This is entirely possible and the end game. The interesting thing is that banks were allowed to sell to hedge funds shorts by saying they had shares even if they don't which is how the funds short more than 100%.

Now silver has been found to be the biggest net short in the banking system and they are going after silver. If that takes off and gets noticed you have 4 million Lamar Hunts that will be taking physical possession, that will not be buying on margins. This is a movement that is gaining in popularity not yet fading.

Anyone that believes all the brokerages independently had trouble filling orders only for the 10 stocks that were being played by this group without any discussion from major regulators defies logic of how things work. Took 2 days to ban all short sales of banks in 2007, took one to protect short selling in 2021.

 

[NW-Bound]

There is a misunderstanding of what is going on a massive scale. There is a float of 46 million shares of gamestop. If you have 4 million people participate they could each buy 10 shares and hold forever and the stock is going parabolic. There is nothing the shorts will be able to do, as the long term shareholders sell eventually you only have the participants with shares and then the price explodes up. This is entirely possible and the end game.

By hoarding you can drive the price of anything up as long as you can talk others into doing the same hoarding. Eventually, what do you all do with the shares you collectively hold?

The shares are only worth what somebody else is willing to pay for it. Shorts don't want to pay these prices, but perhaps they have to in order to meet margin. When there are no shorts left, who do you sell to? Who would want to pay these prices? And that's why johny-come-lately will be left holding the bag.

The guys who get in early are now selling to shorts, as well as to johny-come-lately.

 

[dunkelblau]

I barely missed my chance to get GME on the cheap last year, but I did pick up shares in a couple of the others that are now on "the shortlist". One of them saw a steep runup the week after Christmas, but by the time I noticed, it had been halted so I entered a limit order to sell, but the price had reverted when the halt was lifted. This morning came another price surge, and this time it seemed to climb through multiple halts. I first noticed after it passed its peak, and I took the opportunity to get out. It grew by 30x in 14 months, so under normal conditions this would be an extreme outlier, but these days it's not that rare. The other case was a triple in eight months (after doubling down three weeks ago) and so is literally an underperformer vs most of the market.

I've noticed quite a few smallcap thinly traded names suddenly spike higher in price only to give it back hours later. This kind of behavior seemed pretty rare before last year but has become an almost everyday occurrence recently. If this continues, I may see additional opportunities to lighten my load in the coming weeks. It's also become far more difficult to find pink sheet penny stocks trading below triple their 52-week lows, which is amazing considering that most of these names are dark/defunct/caveat emptor. I still think these market behaviors portend a major bear market coming in the next few months. I fear that the intense news coverage of this GME incident at a time when life's usual distractions are limited by the pandemic may cause damage that is deeper and more widespread than in the past.

Here's a story about a UF grad student who will retire his student loans with his GME winnings:

Instead of counting on a jubilee and going back to the well, looks like he's taking the company name to heart.

 

[NW-Bound]

I've noticed quite a few smallcap thinly traded names suddenly spike higher in price only to give it back hours later. This kind of behavior seemed pretty rare before last year but has become an almost everyday occurrence recently. If this continues, I may see additional opportunities to lighten my load in the coming weeks. It's also become far more difficult to find pink sheet penny stocks trading below triple their 52-week lows, which is amazing considering that most of these names are dark/defunct/caveat emptor...

Do hedge funds bother to sell short these tiny penny stocks, which are really mom-and-pop operations that should not even be public stocks? What's the narrative here?


Back on bigger real companies that are bidded up by Redditors, here's another major shareholder of AMC who took advantage of the price pump to take profit. Does that profit come from the hedge funds, or from Redditors, or both?

Silver Lake, a major investor in AMC Entertainment, just sold all of its shares for a $113 million profit

 

[jim584672]

The Reddit folks pumping these stocks better be careful. Spreading false information to drive up a stock is illegal. They are calling on the SEC to come down on Robinhood. The SEC more likely comes down on them for running a pump and dump scheme.

 

[Running_Man]

By hoarding you can drive the price of anything up as long as you can talk others into doing the same hoarding. Eventually, what do you all do with the shares you collectively hold?

The shares are only worth what somebody else is willing to pay for it. Shorts don't want to pay these prices, but perhaps they have to in order to meet margin. When there are no shorts left, who do you sell to? Who would want to pay these prices? And that's why johny-come-lately will be left holding the bag.

The guys who get in early are now selling to shorts, as well as to johny-come-lately.

You are viewing this through the lens of investment, if a large subset of a population decides they view it as entertainment by not allowing “the man” to close business they admired into obliteration, they don’t care about that money or certificate any more than a ticket stub to a professional sporting event that they can no longer attend.

What they get is the crowd sense of belonging of rooting for something that in their view is better than trying to make a buck. I think a large portion of them do not view 50-60 year old types living off of Nobel finance theories as worthy of participating in their economy and noticing the huge weakness in their implementation, not unlike Jedi using ”the force” to blow up the Death Star in star wars.

How large this movement grows will determine what kind of impact they have, and when it might end. I am not trying to rationalize or predict the behavior but in observing I notice the crazed ones are on TV, mostly mainstream journalists who need hedge funds on their shows and for their speaking fees, are falling out of their chairs in an attempt to "save" the little guy by letting only the big guys trade, linking their behavior in buying stock to criminal behavior, calling for investigations.

Their is no doubt another large contingent jumping in and out to try and make money when they believe they can by “exploiting” their foolish behavior. time will tell if they are right or more like the general for the Empire stating , “Evacuate now? In our moment of glory? I think you overestimate their chances."

 

[JoeWras]

What they get is the crowd sense of belonging of rooting for something that in their view is better than trying to make a buck. I think a large portion of them do not view 50-60 year old types living off of Nobel finance theories as worthy of participating in their economy and noticing the huge weakness in their implementation, not unlike Jedi using ”the force” to blow up the Death Star in star wars.

This is my sense too. We'll see how strong their rebel blood is.

They do have a few issues. Liquidity being one. Spreading too thin being another. To get liquidity for the next war front, will they have to sell? Whoops, can't sell. Gotta keep the price up.

Some of their "leaders" will be outed as manipulators for their own profit. What will happen when they discover they have meta-rebels inside the rebel force?

Finally, greed can rear itself any time. Some of the crowd may suddenly see a chance to buy that Telsa they could never afford.

The whole thing bears watching.

 

[RVplusDog]

They do have a few issues. Liquidity being one. Spreading too thin being another. To get liquidity for the next war front, will they have to sell?

I’m on the WSB Reddit sub a lot, been there for years. There are over 6.7 million members now, and many of them only have one share, or even a fraction. So liquidity may be less of an issue than it used to be. I have one share of GME left, holding to the moon (or 0) because why not? As runningman said, it’s entertaining. There are actually people in the (Fat) Fire area here who spend more than that on a bottle of wine.

CNBC and a lot of the other press are ignoring or glossing over the best of WSB. There is a lot of REALLY good analysis and discussion there. It gets upvoted, the particular experts build up credibility and karma over years of sharing their knowledge. As some have said, in certain ways we made our own mutual funds, and in a lot of ways we are just like any other investment club.

In some ways it’s like this FIRE board: I see that some of you have been here for many years, made thousands of posts. I can look up your old & new posts. There are also the newbies who come on, ask or say one or two things, and disappear.

As far as the worst of it: I take most of the dramatic posts (I’m mortgaging the house to buy GME!) with a grain of salt. And it’s easy to skip over the profane and inane drivel. It’s like skipping the chatter on Squawk Box. There are even filters available on a lot of the subs to assist with this.

And yes, there is a contingent analyzing silver as an upcoming investment opportunity. They are discussing physical, comex, mining stocks, trust instruments, history (Koch), and more. It’s quite educational.

And every (serious) post there does include the same disclaimers I see on Options Action and every single brokerage website: investments carry risk, don’t invest more than you can afford to lose, yadda yadda.

 

[Mr._Graybeard]

One thing that puzzles me about KOSS as a run-up target: the stock wasn't being shorted much at all. Schwab shows the short interest at 0.2% as of Jan. 15. Who is getting squeezed?

Also, the percentage of institutional interest is low at only 9%. I think I read that the company employs 34 people. It's a candy store.

 

[njhowie]

One thing that puzzles me about KOSS as a run-up target: the stock wasn't being shorted much at all. Schwab shows the short interest at 0.2% as of Jan. 15. Who is getting squeezed?

Also, the percentage of institutional interest is low at only 9%. I think I read that the company employs 34 people. It's a candy store.

What is happening is the logical progression of what the WSB folks started. Originally, their claim was they were sticking it to the short sellers with their mass of small investors. Fine, I can appreciate that. Even the big boys will have cat fights amongst each other if they find another guy/firm has a large position in a company where they can take the opposite side, inflict pain, and make money.

However, the WSB folks quickly turned to going after companies with a small float ... colluding amongst each other to buy en masse and manipulate the shares higher. That is what will force the SEC to move and take action. We've seen this before with Tokyo Joe (google if you've never heard of him and what he did).

Personally, by chance, I purchased a few (under 20) shares of SIEB on Wednesday at $3.81. I woke up yesterday to see the shares 6x higher and quickly sold in pre-market at $23. For what reason would they go after SIEB? Under 10 million shares in the float, under 3% of the float shorted, and average trading volume of 20,000 shares a day. Yesterday it traded 34 million shares on no news. Similar situation with KOSS.

What these companies need to do is take advantage of the situation, and quickly issue a few million shares of stock and fill their cash coffers. If they do that, they can solidify their futures, and at least provide some semblance that the stock price is justified on a valuation basis. For example, if you take in $100 million cash, all else being equal, when the shares come back down to Earth, there will be a floor put under the shares - it won't be to a market cap of $25 million.

There will be action taken. There is also a lot of misinformation going around about the situation, but that is par for the course when you get average folks participating in something they really have no understanding of.

 

[RVplusDog]

One thing that puzzles me about KOSS as a run-up target: the stock wasn't being shorted much at all. Schwab shows the short interest at 0.2% as of Jan. 15. Who is getting squeezed?

Also, the percentage of institutional interest is low at only 9%. I think I read that the company employs 34 people. It's a candy store.

Here’s one explanation... they weren’t going for a gamma squeeze, I don’t think, to start - just profits:
“ Stoking the talk is former Goldman Sachs portfolio manager Will Meade who yesterday called out KOSS, CLVS and movie theatre operator AMC Entertainment Holdings (NYSE:AMC) as prime fodder for the Reddit group’s focus, with each stock showing short interest above 35% and then priced under $10 a share. Meade’s Twitter profile shows he “founded $1BN hedge fund.”

KOSS stock gained 79.6% yesterday and was up about the same as of 7:30 Eastern this morning. Volume on Monday was almost 19 times the daily average and gave the maker of headphones a market capitalization of $44.4 million.”

 

[Mr._Graybeard]

The GS portfolio manager may have been looking at Dec 31 short interest numbers for KOSS, but that was only a quick aberration as a result of trading on Dec 29 - where 15 million shares traded and shares went as high as $5.10 from prior day close of $2.40. That short interest of 590,000 shares quickly came down to only 13,000 by Jan 15.

https://www.nasdaq.com/market-activity/stocks/koss/short-interest

https://finance.yahoo.com/quote/KOSS/history?p=KOSS

Today market cap on KOSS is $474 million - for a has-been company with only $18 million in annual sales. Go look at the historical price chart over the past 35 years - never above $15. But, there are only 7.4 million shares outstanding with 3.7 million in the float. It doesn't take a rocket scientist to figure out what happens when you throw between 10 million and 30 million shares at it during a single day.

The big volume day on 12/29 was the corporate officers cashing in their stock options. According to the Milwaukee Business Journal, insiders control 71.5% of the stock.

I would think there are hundreds of other thinly-traded, lackluster public companies that would be better targets.

The CFO and VP of operations sold off some shares on Jan. 25. Bet they're kicking themselves now.

 

[MRG]

I’m on the WSB Reddit sub a lot, been there for years. There are over 6.7 million members now, and many of them only have one share, or even a fraction. So liquidity may be less of an issue than it used to be. I have one share of GME left, holding to the moon (or 0) because why not? As runningman said, it’s entertaining. There are actually people in the (Fat) Fire area here who spend more than that on a bottle of wine.

CNBC and a lot of the other press are ignoring or glossing over the best of WSB. There is a lot of REALLY good analysis and discussion there. It gets upvoted, the particular experts build up credibility and karma over years of sharing their knowledge. As some have said, in certain ways we made our own mutual funds, and in a lot of ways we are just like any other investment club.

In some ways it’s like this FIRE board: I see that some of you have been here for many years, made thousands of posts. I can look up your old & new posts. There are also the newbies who come on, ask or say one or two things, and disappear.

As far as the worst of it: I take most of the dramatic posts (I’m mortgaging the house to buy GME!) with a grain of salt. And it’s easy to skip over the profane and inane drivel. It’s like skipping the chatter on Squawk Box. There are even filters available on a lot of the subs to assist with this.

And yes, there is a contingent analyzing silver as an upcoming investment opportunity. They are discussing physical, comex, mining stocks, trust instruments, history (Koch), and more. It’s quite educational.

And every (serious) post there does include the same disclaimers I see on Options Action and every single brokerage website: investments carry risk, don’t invest more than you can afford to lose, yadda yadda.

+1
Nice writeup. I've been on WSB before the madness started and I totally agree. Before the influx there was a lot more good analysis and posts. I'm hoping WSB gets forgotten when everyone realizes it's not a magic money machine and they're left holding the bag.

 

[ERObjd]

My little taxable 8k Vanguard VBIAX mutual fund does have some Gamestop stock among the 3048 stocks that make up this fund.I had to look about 10 pages deep oon the VBIAX fund holdings to find it. That makes an owner of maybe a 1/000000000000 of a fractional share of Gamestop. Not sure how much gamestop moves the needle in this fund ,But I own some Gamestop by proxy for what it's worth

 

[dunkelblau]

Do hedge funds bother to sell short these tiny penny stocks, which are really mom-and-pop operations that should not even be public stocks? What's the narrative here?


Back on bigger real companies that are bidded up by Redditors, here's another major shareholder of AMC who took advantage of the price pump to take profit. Does that profit come from the hedge funds, or from Redditors, or both?

I doubt that these names are marginable and the daily transactions are less than 1M USD, so probably not. I don't know the backstory, one might suspect something nefarious like a "wolf of wall street" boiler room operation. But it seems like radio silence here-- no news releases and no discussion on Reddit boards that I've witnessed anyway.

So could this be a "wolf of main street" version? Someone with a bit cash or credit but no brokerage connections could conceivably try to quietly accumulate a large position in a dormant stock that is more or less worthless. Once all in they suddenly go MLM and start distributing free chunks to "influencers" on social media, who upon receipt of shares naturally start to mention the name and thereby attract buying interest. Or maybe a safer method would be writing free call options to these influencers at 100x what it cost to acquire the shares on the open market. This way if the first batch of call recipients abide by their conflict of interest standards, they can try again with another batch after the first round of calls expires (perhaps this can explain the multi-spike names?).

Sure this sounds illegal and unethical to me too, but I wonder whether something like this may be involved in the GME story? Like I would seriously doubt that Reddit users don't include some fraction of financial predators, and they are obviously over-represented amongst influencers. A popular Reddit board seems to me to be ideal machinery to turn into a virtual boiler room. I don't know where the profit comes "from" but I imagine that a large chunk of it goes "to" whoever set it all up.

 

[cyber888]

I bought Novavax since $107 .. since their covid vaccine efficacy on the original Wuhan strain is 96% and their vaccine holds up well on the new mutated UK strain at 86% efficacy. They shoot up yesterday to $220-$230. They have a low float of 62 million shares with a market cap of $10 billion vs. $60 billion for Moderna. I'm hoping their stock rises like Gamestock, except that their fundamentals are solid with 2 billion doses capacity this year, and they already signed several contracts to deploy their vaccine this year. Their sales will go from $100+ million in 2020 to $3 - 5 Billion in 2021.

 

[jurgs01]

140% short position against gamestop, which means in some way there is naked shorting going on. Naked shorting is supposed to be illegal. Looks like some gamers said NO and banded together and took the Wall street big boys to the woodshed.

Not necessary. Say there is five of a stock. That stock is loaned to a short position and sold into the market to a different firm. That different firm allows someone to short those five shares and sell them into the market. In that small example, there are five outstanding shares with a 200% short position.

 

[dadu007]

I’m on the WSB Reddit sub a lot, been there for years. There are over 6.7 million members now, and many of them only have one share, or even a fraction. So liquidity may be less of an issue than it used to be. I have one share of GME left, holding to the moon (or 0) because why not? As runningman said, it’s entertaining. There are actually people in the (Fat) Fire area here who spend more than that on a bottle of wine.

CNBC and a lot of the other press are ignoring or glossing over the best of WSB. There is a lot of REALLY good analysis and discussion there. It gets upvoted, the particular experts build up credibility and karma over years of sharing their knowledge. As some have said, in certain ways we made our own mutual funds, and in a lot of ways we are just like any other investment club.

In some ways it’s like this FIRE board: I see that some of you have been here for many years, made thousands of posts. I can look up your old & new posts. There are also the newbies who come on, ask or say one or two things, and disappear.

As far as the worst of it: I take most of the dramatic posts (I’m mortgaging the house to buy GME!) with a grain of salt. And it’s easy to skip over the profane and inane drivel. It’s like skipping the chatter on Squawk Box. There are even filters available on a lot of the subs to assist with this.

And yes, there is a contingent analyzing silver as an upcoming investment opportunity. They are discussing physical, comex, mining stocks, trust instruments, history (Koch), and more. It’s quite educational.

And every (serious) post there does include the same disclaimers I see on Options Action and every single brokerage website: investments carry risk, don’t invest more than you can afford to lose, yadda yadda.

Good summation. This is in line with my experience as well.

 

[tenant13]

Where do you see trading heading after last week's GameStop/Robinhood drama?

I think we are all familiar with the GameStop saga by now. While I'm active on Reddit and was occasionally checking r/wallstreetbets, I wasn't involved in the frenzy. At this point it's pretty clear it's not about any individual stock - or even any individual broker or a hedge fund. And it won't be over soon.

I don't see any of this as a political issue (unless we think that debating current fundamentals of our financial system is political) but I'm really curious about the future of the stock market and how we fit into that. And I think that this question is relevant both for active traders and index funds investors as well.

Do you believe we should expect sweeping changes in what's allowed or not (ie shorting, margin trading or high frequency trading)? Would that tank the market? Or help it by making it more about fundamentals and less about "innovative financial instruments"? Do you think that we should expect decentralized stock trading emerging from that (I'm thinking blockchain and DeFi)? How do you feel about keeping your money at an institution that at a click of a mouse can restrict your access to it?

I kind of feel that this discussion is long overdue and necessary. I wish it could benefit the little guy and in time restore faith in the system among kids who are so jaded now that they just may be a lost generation. But I have my doubts...

 

[ivinsfan]

The Reddit folks pumping these stocks better be careful. Spreading false information to drive up a stock is illegal. They are calling on the SEC to come down on Robinhood. The SEC more likely comes down on them for running a pump and dump scheme.

LOL...those Hedge boys better be careful about what they wish for, in reality the last thing they want are more regulations. Or anybody asking questions about the way they do things.

 

[Fermion]

I was thinking of taking a small position in BLUE (blue bird bio) as they have a 14% short interest.

I wonder what the formula is for short interest vs reddit pumpability?