Stock market drama llama: GameStop shares dramatically rise in price from some Reddit users' trading in it

[lpetrich]

GameStop shares are on a wild, Reddit-driven run. Here's why. - The Washington Post - "Short sellers and retail investors have sent the video game company’s stock up more than 2,600 percent since its April lows"

GameStop shares spiked more than 140 percent Monday, forcing several trading pauses and extending a staggering rally sparked by the passions of retail investors on social media betting against the institutional wisdom of Wall Street.

But that frenzied optimism flipped, sending the stock briefly into negative territory late in the morning before it did another U-turn. It finished the day up more than 18 percent, at $76.79 a share.

The video game retailer’s stock has soared more than 300 percent since the beginning of the year, charting an epic run for a brick-and-mortar business that, like other retailers, has seen its customers migrate online, forcing the company to shutter hundreds of stores last year. But unlike many other stocks that have flourished because of the disruptions of the coronavirus pandemic, GameStop’s mind-boggling run has been fueled by a confluence of trading dynamics, pushing the stock price to dizzying heights, largely divorced from the fundamentals of the business.

...
Part of GameStop’s tremendous climb is tied to those who believe its shares will sink. At the start of the year, GameStop was among the most highly targeted companies by short sellers — investors who bet against a company and who stand to make money when a stock price falls. To short a company, a seller typically borrows a stock and then sells it, with the intention of buying the stock back at a later date, once the price drops. The seller then returns the shares to the entity from which it borrowed, and pockets the difference in price.

But in cases where the pessimistic bet fails to pan out, and the stock price rises, short sellers still have to cover their borrowed shares and are forced to buy the stock back at the higher price. This is known as a “short squeeze.” In this situation, short sellers move to cut their losses and purchase shares that they expected to fall in value but in fact have risen. This money-losing “squeeze” can fuel a cycle of even higher prices, as short sellers buy more shares and drive costs upward.

 

[lpetrich]

GameStop, AMC stocks surge as Reddit forum takes on Wall Street - The Washington Post - "Users on online trading communities are claiming victory for wrecking costly hedge fund gambles those stock prices would fall."

Shares of video game retailer GameStop and movie theater giant AMC Entertainment soared to astronomical levels Wednesday as an apparent swarm of ordinary investors, spurred on by a Reddit message board, took on big Wall Street funds that had bet the stock prices would fall.

GameStop’s stock prices more than doubled, to $345 a share, or more than 130 percent. AMC, beleaguered by the coronavirus pandemic and stay-at-home measures, quadrupled to $19 a share.

...
The GameStop and AMC price surges were so dramatic that trading for both companies was temporarily halted by the stock exchanges to temper volatility. But once trading resumed, prices took off again. TD Ameritrade, a leading trading platform, took the unusual step of attaching restrictions on both stocks, citing “an abundance of caution amid unprecedented market conditions.”

The extraordinary trading action, which many analysts linked to a pandemic-related surge in day trading by average investors, seemed disconnected from the companies’ financial prospects. GameStop, which sells video game software via a network of bricks-and-mortar retail outlets, has lost money in five of the past six quarters. Revenue in the quarter that ended October was down 31 percent from the same period one year earlier.

“This is a flash mob with money,” said Peter Atwater, an adjunct lecturer of economics at the College of William & Mary.

Newly confirmed Treasury Secretary Janet Yellen and the rest of the Biden administration’s economic team are monitoring the matter, White House press secretary Jen Psaki told reporters at a midday briefing. The situation is a “good reminder” that “the stock market is not the only measure of the health of our economy,” she said.

Seems like the Dutch Tulip Mania and other such economic bubbles over the centuries. In the late 1980's was the biotech bubble, in the late 1990's the dotcom bubble, in the late 2000's the housing bubble. There have even been bubbles in Cabbage Patch Kids and Furbies.

 

[lpetrich]

GameStop's stock surge: Reddit traders vs hedge funds - CNN Video

Even Reddit is beginning to discuss the endgame for the wild GameStop ride - MarketWatch

At the source of the madness, the Reddit WallStreetBets forum, there is a fascinating if not-safe-for-work thread discussing the endgame for GameStop. “It’s rapidly becoming apparent that we will soon enter the GME endgame. Before you can come up with an exit strategy or, if you’re still on the fence, decide whether to jump in, you need to form an opinion about the GME bull thesis, without considering the short squeeze,” says this user, Thicc Dads Club.

GameStop Is a Bubble in Its Purest Form - WSJ - "It is tempting to see GameStop’s soaring stock as merely the result of clownish behavior in a chat room. That would be a mistake."

 Economic bubble - the Dutch Tulip Mania was in 1634–1637. A more recent one was the British Railway Mania in the 1840's.

GameStop, meme stocks, and the revenge of the retail trader | TechCrunch

GameStop shares are set to rally 70% this morning when trading starts, and AMC shares opened up 300%, extending a run that has perplexed market observers, irked hedge funds, and generally made crypto’s recent gains appear soft and weak.

Being a retail trader is mostly being a sucker, hoping to best the markets while lacking the infrastructure, access, and information that professionals enjoy. Hell, most professional fund managers that regular folks can invest in fail to beat the market. That’s one reason why index funds and other passive investments that merely track aggregate performance have grown so much in recent years; why pay more to have someone make you less money than simply making the same returns as the S&P 500?

 

[repoman]

If enough people can take a slight loss to destroy a hedge fund is this really a problem?

 

[lpetrich]

GameStop's Stock Rises, Spurred on By Reddit Message Board - The New York Times

Millions of amateur stock traders collectively are taking on some of Wall Street’s most sophisticated investors. They’ve piled into trades around companies that other investors had written off, pushing stock prices to stratospheric levels.

The main focus is GameStop, the troubled video game retailer. Its stock is up 1,700 percent this month, including Wednesday’s climb of 135 percent. AMC Entertainment rose 300 percent on Wednesday, and BlackBerry is up more than 275 percent this month.

The surging shares have become detached from the factors that traditionally help establish a company’s value to investors — like growth potential or profits. But the traders who are piling in probably aren’t thinking about those fundamentals.

Instead, they are part of a frenzy that appears to have originated on a Reddit message board, WallStreetBets, a community known for irreverent market discussions, and on messaging platforms like Discord. (One comment from WallStreetBets read, “PUT YOUR LIFTOFF DIAPERS ON ITS ABOUT TO START.”) Both Tesla’s Elon Musk and the billionaire tech investor Chamath Palihapitiya have encouraged the crowd via Twitter.

My favorite reactions:

Alexandria Ocasio-Cortez on Twitter: "Gotta admit it’s really something to see Wall Streeters with a long history of treating our economy as a casino complain about a message board of posters also treating the market as a casino" / Twitter
then
Alexandria Ocasio-Cortez on Twitter: "Anyways, Tax the Rich" / Twitter


Donna Imam on Twitter: "While billionaire's decide which private island, yacht, or jet to buy here's how retail investors are celebrating Robin Hood wins. #StockMarket (pic link)" / Twitter - "I can now write my mom a check and put my sister through lymes treatment. This has been a very rough year, but I'm so thankful for every single one of you."

Donna Imam on Twitter: "THIS, while 'business pundits' admonish retail investors on GameStop. $GME (link)" / Twitter - "Poor as dirt, $40 in my account after paying rent, you boys are helping me put food on the table this week."

Donna Imam on Twitter: "Hedge funds float retail investor regulation on CNBC because Americans on Robinhood have 'nothing to lose' (links)" / Twitter

Donna Imam on Twitter: "We don't want your philanthropy we'd rather be debt free. r/wsb (link)" / Twitter - "I officially have made enough money on GME to pay off both of my credit cards in full. Thank you reddit."

Donna Imam on Twitter: "Retail investors go for .0025% of hedge fund profits and Nasdaq CEO Adena Friedman talks FINRA and SEC on Squawk Box — says 'rooting out market manipulation' and ensuring 'legitimate activity' is NOW also part of their role. $GME (link)" / Twitter - "Im a single Dad of 5, and decided to use my stimulus check for good. I bought my kids new clothes, and then put the rest into GME. Nothing but appreciation to you guys for turning 370 bucks into 4k. This is just the start!"

 

[repoman]

Maybe Redditors can get their own fiber optic line and supercomputer next to NASDAQ/NYSE for high frequency trading.

 

[Trausti]

Well done.

 

[Harry Bosch]

GameStop's Stock Rises, Spurred on By Reddit Message Board - The New York Times

Millions of amateur stock traders collectively are taking on some of Wall Street’s most sophisticated investors. They’ve piled into trades around companies that other investors had written off, pushing stock prices to stratospheric levels.

The main focus is GameStop, the troubled video game retailer. Its stock is up 1,700 percent this month, including Wednesday’s climb of 135 percent. AMC Entertainment rose 300 percent on Wednesday, and BlackBerry is up more than 275 percent this month.

The surging shares have become detached from the factors that traditionally help establish a company’s value to investors — like growth potential or profits. But the traders who are piling in probably aren’t thinking about those fundamentals.

Instead, they are part of a frenzy that appears to have originated on a Reddit message board, WallStreetBets, a community known for irreverent market discussions, and on messaging platforms like Discord. (One comment from WallStreetBets read, “PUT YOUR LIFTOFF DIAPERS ON ITS ABOUT TO START.”) Both Tesla’s Elon Musk and the billionaire tech investor Chamath Palihapitiya have encouraged the crowd via Twitter.

My favorite reactions:

Alexandria Ocasio-Cortez on Twitter: "Gotta admit it’s really something to see Wall Streeters with a long history of treating our economy as a casino complain about a message board of posters also treating the market as a casino" / Twitter
then
Alexandria Ocasio-Cortez on Twitter: "Anyways, Tax the Rich" / Twitter


Donna Imam on Twitter: "While billionaire's decide which private island, yacht, or jet to buy here's how retail investors are celebrating Robin Hood wins. #StockMarket (pic link)" / Twitter - "I can now write my mom a check and put my sister through lymes treatment. This has been a very rough year, but I'm so thankful for every single one of you."

Donna Imam on Twitter: "THIS, while 'business pundits' admonish retail investors on GameStop. $GME (link)" / Twitter - "Poor as dirt, $40 in my account after paying rent, you boys are helping me put food on the table this week."

Donna Imam on Twitter: "Hedge funds float retail investor regulation on CNBC because Americans on Robinhood have 'nothing to lose' (links)" / Twitter

Donna Imam on Twitter: "We don't want your philanthropy we'd rather be debt free. r/wsb (link)" / Twitter - "I officially have made enough money on GME to pay off both of my credit cards in full. Thank you reddit."

Donna Imam on Twitter: "Retail investors go for .0025% of hedge fund profits and Nasdaq CEO Adena Friedman talks FINRA and SEC on Squawk Box — says 'rooting out market manipulation' and ensuring 'legitimate activity' is NOW also part of their role. $GME (link)" / Twitter - "Im a single Dad of 5, and decided to use my stimulus check for good. I bought my kids new clothes, and then put the rest into GME. Nothing but appreciation to you guys for turning 370 bucks into 4k. This is just the start!"

So only Billionaires and or "Wall Streeters" buy stocks or gamble on the market? How elitist!

 

[lpetrich]

Charles Booker on Twitter: "GameStop made the game stop." / Twitter
then
Rashida Tlaib on Twitter: "" / Twitter


Anthony V. Clark on Twitter: "Those hedge fund managers just need to grab themselves up by their boot straps, find a job, work really hard, & don’t waste their money on IPhones...." / Twitter
then
Refugees Son on Twitter: "@anthonyvclark20 Its really the avocado toast that sneaks up on your wallet" / Twitter
and
StevieSTILLSaid on Twitter: "@anthonyvclark20 @wihorne That’s their fault for not having 18 lifetimes of expenses in their savings account. https://t.co/uZWRNmS0Vx" / Twitter


Donna Imam on Twitter: "Billionaires collectively gain over a trillion dollars, CNBC sleeps. Retail investors squeeze a few billion from exploitative hedge funds and now CNBC wants Robin Hood traders regulated out of existence. $GME" / Twitter
then
Gary Whitehill on Twitter: "Exactly.
Total scam. Totally rigged." / Twitter

Bryan Giardinelli on Twitter: "I’ve made more from an hour shorting AMC stock today, than I have received in financial help from federal government since I lost my job in March.

Idk how this all works, but I’m on board with using capitalism to destroy capitalism if it works *" / Twitter


Streetinsider.com on Twitter: "CNBC's David Faber said he is hearing a number of hedge funds are in similar trouble that Melvin Capital saw in its GameStop $GME and may need to be bailed out. https://t.co/KAiADPUnOD" / Twitter
then
Gravel Institute on Twitter: "A $600 check should be enough to tide them over." / Twitter

Disclose.tv on Twitter: "JUST IN - NASDAQ threatens to halt stocks over social media chatters." / Twitter
then
nelson mandela on Twitter: "@disclosetv Translation: How dare the PEASANTS find a way to game the stock market to their benefit, only BILLIONAIRES who run hedge funds & large banks can do that" / Twitter
and
Savvy☭ on Twitter: "Market manipulation for me but not for thee" / Twitter

 

[lpetrich]

Ryan K. Rigney on Twitter: "Tomorrow morning a subreddit is going to successfully drive a $13 billion hedge fund into insolvency." / Twitter
then
jordan on Twitter: "this is extremely funny & the inevitable aftermath will be the country's wealthy elite—the same people who didn't give a shit as millions of people got fucked over in 08—clamoring for more safeguards on the market to prevent this from happening again bc this time it affects them" / Twitter
I agree. They don't seem willing to take responsibility for their actions.

jordan on Twitter: "we're about to see a chorus of financiers, wall st ghouls and likely some members of congress feign outrage that our market, our sweet, precious market, was manipulated (!) by a bunch of redditors! nevermind that in 08 the people who manipulated the system got fucking BAILOUTS!" / Twitter
He followed up with a lot of tweets where he responded "lol" to people saying how terrible it is that anyone could do what these redditors had done.

Ihssane Leckey on Twitter: "Wall Street runs on manipulation" / Twitter


CNBC Now on Twitter: "BREAKING: SEC releases statement on "ongoing market volatility," saying it is working with "our fellow regulators to assess the situation and review the activities of regulated entities, financial intermediaries, and other market participants" (links)" / Twitter
noting
GameStop jumps more than 130% even as hedge funds cover short bets, scrutiny of rally intensifies

 

[lpetrich]

jordan on Twitter: "2008 financial collapse? You should have considered the risks!

Student loan debt? You should have considered the risks!

Credit card debt? You should have considered the risks!

Hedge fund makes a risky bet & might go under? It's not their fault, shut everything down!" / Twitter
That's typical of the right wing -- exempting themselves and their heroes from the strictures that they demand of others.

Vimana Rider Music #BLM on Twitter: "@JordanUhl Cokehead sociopaths on wallstreet gin the system "savvy businessman"
Poor people do the same - SHUT IT DOWN.
Moved on this shit faster than they did the white supremacists who tried to overthrow democracy" / Twitter

Random Ron on Twitter: "@JordanUhl Guess these Hedge Funds better pick themselves up by their bootstraps." / Twitter

Tim Marinet. Arrest Breonna's killers. on Twitter: "@JordanUhl Don't they have bootstraps they can pull themselves up by?

Just shows they should have saved better and not gotten so many lattes.

Being able to say this for a change feels *good*" / Twitter

 

[Trausti]

Lolz. This is CNN.

 

[lpetrich]

Ken Klippenstein on Twitter: "Hedge fund CEO: I lost $3 billion, my company, my home, and now my wife

Me: Have you considered budgeting?" / Twitter
then
Ana Kasparian on Twitter: "@kenklippenstein Too much avocado toast!" / Twitter

dirtiest of hards on Twitter: "@AnaKasparian @kenklippenstein Think about making your own coffee in the mornings, an excellent way to save a few bucks!" / Twitter

Being Reese on Twitter: "@AnaKasparian @kenklippenstein They might want to think about doing their own yard work. In addition to saving money, physical labor helps to build character as well. Either way,, they'd better get to work fast. Those bootstraps aren't going to pull themselves..." / Twitter

 

[Mumbles]

GameStop's stock surge: Reddit traders vs hedge funds - CNN Video

Even Reddit is beginning to discuss the endgame for the wild GameStop ride - MarketWatch

At the source of the madness, the Reddit WallStreetBets forum, there is a fascinating if not-safe-for-work thread discussing the endgame for GameStop. “It’s rapidly becoming apparent that we will soon enter the GME endgame. Before you can come up with an exit strategy or, if you’re still on the fence, decide whether to jump in, you need to form an opinion about the GME bull thesis, without considering the short squeeze,” says this user, Thicc Dads Club.

I'll only say one thing.

"Hahahah..."Thicc Dads Club". Hahahahaha!!!"

Anything else I could say, has already been said.

 

[lpetrich]

Emma Vigeland on Twitter: "r/wallstreetbets was more effective at putting Wall Street greed and recklessness in check than the federal government has been in decades." / Twitter

Chris Oliver on Twitter: "@EmmaVigeland Did you see them all whining on CNBC? It's foreign influence, we need more regulation. Hit their wallets that's how you hurt these people." / Twitter

Colby on Twitter: "@EmmaVigeland All until Congress decides its not okay when normal people do it, only Wall Street billionaires" / Twitter


rudy betrayed on Twitter: "remember when senators got coronavirus briefings before the public and sold off millions of dollars in stocks before the crash last year and faced no consequences and no regulation? then reddit made one stock into a meme and they’re talking about restructuring the whole market" / Twitter

Senators like Kelly Loeffler. Good riddance to her.

 

[Axulus]

How in the world is placing a big short bet on GameStop an indication of recklessness and greed that needs to be "punished"? The people who buy the stock at these prices are lemming morons and will be incurring big losses when this eventually collapses back down to $20-$30 range. At the end of the day, this isn't a very profitable company nor is it likely to be for the foreseeable future.

There doesn't need to be any regulation against this. The coming financial losses that will be incurred will force them out of the market regardless.

 

[Ford]

There doesn't need to be any regulation against this. The coming financial losses that will be incurred will force them out of the market regardless.

Yeah, because the market always self-regulates, and fixes whatever problems arise.






That's sarcasm, by the way.

 

[Axulus]

There doesn't need to be any regulation against this. The coming financial losses that will be incurred will force them out of the market regardless.

Yeah, because the market always self-regulates, and fixes whatever problems arise.






That's sarcasm, by the way.

Yes, people who buy a very mediocre company at these prices will be self regulated out of the market since they will have vastly reduced capital after incurring the inevitable losses, and those who happen to sell to another sucker before incurring such losses will likely engage in similar stupid behavior again and not be so lucky next time. Or are you under the impression that they are all rich and can afford to keep daytrading indefinitely?

 

[Axulus]

There doesn't need to be any regulation against this. The coming financial losses that will be incurred will force them out of the market regardless.

Yeah, because the market always self-regulates, and fixes whatever problems arise.






That's sarcasm, by the way.

Yes, people who buy a very mediocre company at these prices will be self regulated out of the market since they will have vastly reduced capital after incurring the inevitable losses, and those who happen to sell to another sucker before incurring such losses will likely engage in similar stupid behavior again and not be so lucky next time. Or are you under the impression that they are all rich and can afford to keep daytrading indefinitely?

Inevitably, though, you'll likely see sob stories and calls for SEC intervention after these idiots lose a bunch of money.

 

[Ford]

There doesn't need to be any regulation against this. The coming financial losses that will be incurred will force them out of the market regardless.

Yeah, because the market always self-regulates, and fixes whatever problems arise.






That's sarcasm, by the way.

Yes, people who buy a very mediocre company at these prices will be self regulated out of the market since they will have vastly reduced capital after incurring the inevitable losses, and those who happen to sell to another sucker before incurring such losses will likely engage in similar stupid behavior again and not be so lucky next time. Or are you under the impression that they are all rich and can afford to keep daytrading indefinitely?

Ah yes...I remember when the market regulated itself after the housing market crashed, Everyone on Wall Street realized that bundling mortgages into complicated financial instruments like mortgage backed securities, credit default swaps, and CDOs was a terrible idea and they all stopped doing that..

I mean, why even have the Securities and Exchange Commission? Honesty is the basis of Wall Street, after all!


(that's more sarcasm)