GameStop

[tyke1962]

I'm far from an expert on this industry but am I right in saying a bunch of ordinary investors have beaten the billionaire hedge fund guys at their own game and now said billionaire hedge fund guys are calling foul play and asking for regulations ? .

One for the good guys if true .

 

[Filo]

I'm far from an expert on this industry but am I right in saying a bunch of ordinary investors have beaten the billionaire hedge fund guys at their own game and now said billionaire hedge fund guys are calling foul play and asking for regulations ? .

One for the good guys if true .

 

Thats how I understand it, apparently they have bankrupt one hedge fund

[River Don]

It's more than a bunch.

Basically small investors have coordinated using social media to invest in Gamestop. So we're talking about quite a lot of people.

Some hedge funds had bet against the business and now they've found themselves on the wrong side of a tidal wave of money. And some Gamestop shareholders have inexplicably become billionaires overnight.

Where it ends, who knows? Gamestop isn't a particularly remarkable games retailer. It was expected to go the way of Blockbusters.

[normal rules]

I’ve been monitoring this. Normal every day punters have identified a number of companies who stock were being short sold by hedge funds. (The very rich)
In a nutshell, short selling is done by hedge funds expecting share price to drop. These punters have been sniffling up shares by the millions, thereby driving the price up, meaning hedge fund managers are having to cover their losses by buying more, thereby driving the stock price higher.
Problem now is, this has been identified at the very top in the US. At least two trading platforms  have shut down, preventing punters from buying more stock.
Huge legal arguments now unfolding over the legality of such a move,
There are some eye watering stories of punters literally making millions. One chap supposedly spent 50,000 dollars on GameStop shares when they were 10 bucks each I think they topped out at $480 each. Do the math.
A lot have lost money though as they got on it too late.

[tyke1962]

I’ve been monitoring this. Normal every day punters have identified a number of companies who stock were being short sold by hedge funds. (The very rich)
In a nutshell, short selling is done by hedge funds expecting share price to drop. These punters have been sniffling up shares by the millions, thereby driving the price up, meaning hedge fund managers are having to cover their losses by buying more, thereby driving the stock price higher.
Problem now is, this has been identified at the very top in the US. At least two trading platforms  have shut down, preventing punters from buying more stock.
Huge legal arguments now unfolding over the legality of such a move,
There are some eye watering stories of punters literally making millions. One chap supposedly spent 50,000 dollars on GameStop shares when they were 10 bucks each I think they topped out at $480 each. Do the math.
A lot have lost money though as they got on it too late.

Is it fair to conclude that its perfectly fine and seen as a legitimate business when Wall Street hedge fund company's practice this shorting and what have you but they are trying desperately to shut down in the aftermath of this the ordinary Joe ? .

If so this appears to me to perfectly illustrate where we are as a society today .

One rule for the rich and powerful but nobody else is allowed to play at this casino table .

Would that be fair comment ? .

[River Don]

I’ve been monitoring this. Normal every day punters have identified a number of companies who stock were being short sold by hedge funds. (The very rich)
In a nutshell, short selling is done by hedge funds expecting share price to drop. These punters have been sniffling up shares by the millions, thereby driving the price up, meaning hedge fund managers are having to cover their losses by buying more, thereby driving the stock price higher.
Problem now is, this has been identified at the very top in the US. At least two trading platforms  have shut down, preventing punters from buying more stock.
Huge legal arguments now unfolding over the legality of such a move,
There are some eye watering stories of punters literally making millions. One chap supposedly spent 50,000 dollars on GameStop shares when they were 10 bucks each I think they topped out at $480 each. Do the math.
A lot have lost money though as they got on it too late.

Is it fair to conclude that its perfectly fine and seen as a legitimate business when Wall Street hedge fund company's practice this shorting and what have you but they are trying desperately to shut down in the aftermath of this the ordinary Joe ? .

If so this appears to me to perfectly illustrate where we are as a society today .

One rule for the rich and powerful but nobody else is allowed to play at this casino table .

Would that be fair comment ? .

There probably is a bit of that but I think it's probably more the shock of something new happening. You are right in saying this was an exclusive club that t'interweb is now democratising.

The fact that some investors have been piling in specifically to target hedge funds and not really looking at the true value of the business, presents a challenge for regulators.

I expect eventually reality will bite and some are likely to lose out.

[tyke1962]

I’ve been monitoring this. Normal every day punters have identified a number of companies who stock were being short sold by hedge funds. (The very rich)
In a nutshell, short selling is done by hedge funds expecting share price to drop. These punters have been sniffling up shares by the millions, thereby driving the price up, meaning hedge fund managers are having to cover their losses by buying more, thereby driving the stock price higher.
Problem now is, this has been identified at the very top in the US. At least two trading platforms  have shut down, preventing punters from buying more stock.
Huge legal arguments now unfolding over the legality of such a move,
There are some eye watering stories of punters literally making millions. One chap supposedly spent 50,000 dollars on GameStop shares when they were 10 bucks each I think they topped out at $480 each. Do the math.
A lot have lost money though as they got on it too late.

Is it fair to conclude that its perfectly fine and seen as a legitimate business when Wall Street hedge fund company's practice this shorting and what have you but they are trying desperately to shut down in the aftermath of this the ordinary Joe ? .

If so this appears to me to perfectly illustrate where we are as a society today .

One rule for the rich and powerful but nobody else is allowed to play at this casino table .

Would that be fair comment ? .

There probably is a bit of that but I think it's probably more the shock of something new happening. You are right in saying this was an exclusive club that t'interweb is now democratising.

The fact that some investors have been piling in specifically to target hedge funds and not really looking at the true value of the business, presents a challenge for regulators.

I expect eventually reality will bite and some are likely to lose out.

Hmmm , would it be possible though through hosting a specific social media site yourselves for this purpose attract enough penny type investors in their millions and completely shaft the hedge fund business , not for the purpose of making huge sums of money or obviously losing for that matter but to simply fight back against these people who leave such a stain on society .

I firmly believe the finance industry have much to answer for following the crash in 2008 and many of the problems we've witnessed since then can be traced back to this lot .

Who walked away scott free too I might add .

[BillyStubbsTears]

I don't get this "little man Vs the Establishment" line on Game Stop.

1) The people who ganged together to drive up the share price haven't gained anything from the hedge fund going to the wall. The people who have gained are the other financial institutions who the hedge fund bought the shorted shares from. They have gained colossal amounts for doing precisely nothing.

2) The share price of Game Stop will come crashing down shortly. And, as in any bubble, there will be a massive transfer of wealth in favour of those who bought low and sold high. But they won't be taking that money from the hedge fund. They'll be taking it from suckers who have bought Game Stop shares at $300-400 a pop and who will lose most of that money when the price collapses back to $20 next month.

There's no anti-finance market Robin Hood thing going on here. You can take pleasure in a hedge fund going under, but their wealth hasn't vanished or gone to little guys. It's gone to other financial institutions.

What this does show is the limitation of the stock market. Share price is supposed to reflect the underlying economic prospects of a company. By no measure on earth do Game Stop's prospects justify a $300-400  share price. It's there purely because of a concerted effort to skew the price by over-paying for it.

[RobTheRover]

And yet, right across football, including very close to home, some fans clamour for hedge funds to take over their clubs to chase a pot of gold.

[tyke1962]

I don't get this "little man Vs the Establishment" line on Game Stop.

1) The people who ganged together to drive up the share price haven't gained anything from the hedge fund going to the wall. The people who have gained are the other financial institutions who the hedge fund bought the shorted shares from. They have gained colossal amounts for doing precisely nothing.

2) The share price of Game Stop will come crashing down shortly. And, as in any bubble, there will be a massive transfer of wealth in favour of those who bought low and sold high. But they won't be taking that money from the hedge fund. They'll be taking it from suckers who have bought Game Stop shares at $300-400 a pop and who will lose most of that money when the price collapses back to $20 next month.

There's no anti-finance market Robin Hood thing going on here. You can take pleasure in a hedge fund going under, but their wealth hasn't vanished or gone to little guys. It's gone to other financial institutions.

What this does show is the limitation of the stock market. Share price is supposed to reflect the underlying economic prospects of a company. By no measure on earth do Game Stop's prospects justify a $300-400  share price. It's there purely because of a concerted effort to skew the price by over-paying for it.

As I say Billy I'm not even remotely knowledgeable about this industry but looking at some stuff on US news channels via YouTube today the Hedge Fund guys are going absolutely mental over it .

Which tells me one thing , they've had a good punch on the nose and aren't keen on another one .

Whether they still clean up I don't know but going on what I watched today they sure weren't saying that , they were pyssed , very pyssed .

[BillyStubbsTears]

Tyke.

Yeah. Some of them have lost everything. I have no tears for them. But don't think their money has gone to the little folk. It's gone to whichever other fund they bought the shares off originally to short them.

[tyke1962]

Tyke.

Yeah. Some of them have lost everything. I have no tears for them. But don't think their money has gone to the little folk. It's gone to whichever other fund they bought the shares off originally to short them.

To be honest Billy I wouldn't want to see them ruined , not at all .

What I want to see is the pyss taking removed , the connected untouchable aspect of the top end free to do what the feck they want and no consequences .

A society that works best needs wealth and wealth creators .

What we don't need is that wealth only leading to more wealth for the 5% whilst everyone else becomes poorer as a consequence .

The kind of wealth that buys political power and rigs the game in favour of the 5% and absolutely nobody else .

That's the fight today .

Anybody who lands a good punch on these people is fine by me .

Wish I'd had a slice of this GameStop action because I'd have been on it , not for personal financial gain either but to land a punch on these feckers , I hardly think my savings would have had me retired last week in any case .
@
I loath the neoliberal just in case you didn't know .

 

[River Don]

Tyke.

Yeah. Some of them have lost everything. I have no tears for them. But don't think their money has gone to the little folk. It's gone to whichever other fund they bought the shares off originally to short them.

Correct me if I'm wrong, and I might be, in short selling didn't they sell shares they didn't actually own yet?

Then when the price of the stock falls they buy the shares they need cheap and pocket the difference.

A risky business. In this case they've been left high and dry needing to buy shares at a greater price than they sold them for. I think some of the big winners in this case were directors of GameStop who had a massive windfall.

[big fat yorkshire pudding]

Basically yes so they are betting the price of the stock will fall.

It's a naive and stupid game these guys have played. Some will win, some will lose. The vast majority of winners will be institutions.

It sets a few problems. Will the layman now be tempted to take short term gambles (and it's gambling not investing)?  Will the regulators react and enact controls? We could see controls on pricing for example to prevent this from happening.  It could even be questioned how legal market manipulation is or could be.  That may well be tightened up.

I don't favour it. Very short term trading is gambling, no two ways about it.  I'm a believer that a good busines is a good business and a bad one a bad one. I'm perhaps more risk averse some would say.  But it concerns me that some will now have a go and lose a lot of money without knowing what they are doing.

Fact of the matter is who is now going to buy that stock in a fundamentally rubbish company? There may well be people who've "invested" on putting the stock price up stuck with a stock they cannot shift. That's not clever not in a million years it's just stupidity fuelled by social media. Someone very clever has planned it and played others for fools. Dangerous.

[dknward2]

They have been doing it to Tesla for years one company has lost nearly a billion dollars due to shorting Tesla. This is the reason Tesla and Elon musk sell short shorts

[Janso]

They have been doing it to Tesla for years one company has lost nearly a billion dollars due to shorting Tesla. This is the reason Tesla and Elon musk sell short shorts

Does he like short shorts?

[River Don]

I have a mate who works in finance who shorted a company once. He was in quite heavily but come Monday morning it paid off for him.

He told me it was the most nerve-racking weekend of his life. I don't think he ever tried it again.

It is pure gambling.

[big fat yorkshire pudding]

They have been doing it to Tesla for years one company has lost nearly a billion dollars due to shorting Tesla. This is the reason Tesla and Elon musk sell short shorts

To a point. Tesla is overvalued but it is fundamentally a strong company with potential first mover advantage and unique properties and assets (granted many intangible). I wouldn't buy now but it's very different.  Fundamentally Tesla's price will stay high whilstever it is unique and largely unchallenged in its area.

Facebook was similar as was Google, it ramped on potential not financial success.

[River Don]

https://m.youtube.com/watch?v=j4SRsGn14PI

[BillyStubbsTears]

RD

Shorting means you borrow shares with an agreement that you'll return them in X days. Then you immediately sell the borrowed shares, say at £1 each, in the expectation that in X days time, when you have to return them the price will be 50p. On Day X, you buy them at 50p, return them to the original owner and pocket the other 50p.

Grand if it works. Catastrophic if the price goes up to £10 on Day X. Which is what happened with Game Stop.

[BillyStubbsTears]

What I don't quite get is what the incentive us for the original owner to loan the shares out.

[River Don]

On TV a trader was explaining how they are able to sell more shares than actually exist and something might have to be done about it. It appeared to be all above board but it sounds dodgy to me.

[tyke1962]

From what I've researched tonight and as I say I'm no expert  on this .

Stock buybacks are basically a tactic of market manipulation , it reduces the stock available to buy and so pushes the stock price up which isn't any kind of indication of a company's true health at all .

Apparently this was a banned practice before Reagan came to power , no surprise there then he changed that .

Pharmaceutical company Merck apparently charge top dollar for their medicines and play the research and development of their products as the reason , fair enough I get that until it comes to light that they spent four billion dollars more on stock buybacks than they did on R&D .

It's also claimed that if Walmart diverted only half the money it spent on stock buybacks its lowest paid workers many of whom are in work poverty it could lead them to receiving a 50% pay increase .

Trickle down economics !!!

Great system 

[River Don]

What I don't quite get is what the incentive us for the original owner to loan the shares out.

Here's your answer:

By facilitating shorting, and presumably taking a cut of any profit or charging the borrower a fee, the lender gets to keep the share whilst participating in any fall in value which, after receiving the cut or fee, might compensate for any drop in value.

[BillyStubbsTears]

Stock markets are supposed to exist, in theory, to move money away from inefficient companies and towards new and profitable ones. In practice, they get games by upper class barrow boys who know how to play the system to make themselves money, whether that helps the real economy of not.

Personally, I'd ban hedge funds. They are a perversion of the purpose of the stock market.

But that ain't going to happen when there are senior cabinet ministers who have founded and run them and made themselves wealthy as a result. Like Rees-Mogg for example.

[BillyStubbsTears]

That makes sense RD.

[tyke1962]

Stock markets are supposed to exist, in theory, to move money away from inefficient companies and towards new and profitable ones. In practice, they get games by upper class barrow boys who know how to play the system to make themselves money, whether that helps the real economy of not.

Personally, I'd ban hedge funds. They are a perversion of the purpose of the stock market.

But that ain't going to happen when there are senior cabinet ministers who have founded and run them and made themselves wealthy as a result. Like Rees-Mogg for example.

Which is the kind of practice a Labour Party should be all over Billy .

If not then what's the point of them ?

Do you see SKS on that kind of mission Billy ?

Genuine question by the way .

[Superspy]

It'll be interesting to see how it plays out tomorrow. The way the subreddit (where this all popped up from) has exploded over the last few days and the sheer amount of people claiming to be ready to commit to buying more shares when the market opens tomorrow could push the price way higher than it is now. BST is absolutely right that the company is nowhere near strong enough to justify this, but in this case that's not what it's about. So it will come crashing down at some point...some little guys will make a fortune beforehand, some will make a modest amount during, and some will be left holding the bag afterwards. I'll let you know which one of the last 2 is me in a few days time, haha.

[rich1471]

The Reddit army are know buying silver

[GazLaz]

It’s a glorified Ponzi scheme. The hedge fund excuse is rubbish. They target shorted stocks so the price rises are amplified due to buy backs.