Anyone want to explain the Gamestop thing

[Spy Car]

24 minutes ago, MommytoFour said:

Up until recently, he worked in marketing at a life insurance company. I don't think he's been working as a financial analyst any time in the recent past.  I haven't read the whole thread but why do you think that he should be in legal trouble?  On Reddit, he hasn't even been encouraging people to buy GME. He has just been posting screenshots of his GME buys and account balances since June 2019.

 

According to both the WSJ, Reuters, and CNBC Gill is a Chartered Financial Analyst. He drove this scheme from what I've read and I'm certain he is going to be investigated by the SEC. Stock manipulation is a serious financial crime. 

Bill

Edited January 30, 2021 by Spy Car

[Spy Car]

8 minutes ago, BeachGal said:

According to my son, who is a trader, they might try but are in murky water. It’s hard to say at this point what will happen.

Robin Hood, otoh, is manipulating the market but will probably not be affected due to their affiliations with high frequency traders (HFTs) some of whom now sit on the board of the SEC.

Other things are going on but we’ll have to wait to see what transpires.

Pensions and 401Ks are very unlikely to be affected. ERISA protects participants’ investments and works well.

This is likely to blow over but will be interesting to see how it unfolds.

I agree that it is "murky" on two fronts. One it is a novel type scheme. Two, one needs to prove intent. But I don't think this will "blow over." I certainly hope not.

These schemes are very dangerous. This is stock manipulation.

Bill

[Ausmumof3]

https://www.abc.net.au/news/2021-01-30/gamestop-is-the-pawn-in-a-new-battle-between-wall-st-and-main-st/13103690

This seemed interesting.  Hopefully it’s not a sign of a bigger bubble

 

Edited January 30, 2021 by Ausmumof3

[idnib]

I think there's no way to tell what will happen; it's a global story and when US markets are closed people pick up the stock or options in the UK, Korea, Germany, Finland, Dubai, etc. Some people who've broken the law will face no consequences, some people who didn't have much responsibility will end up carrying some. And I'm not just on one side or the other.

I have no idea if what either Gill , the hedge funds, or RH did was illegal. I have no doubt the SEC will look into all of it. Posting anonymous gains might in violation of the ethics rules for being a chartered financial analyst, but it may not be enough to be illegal in a world full of message boards (not just reddit) where people post images of their accounts, positions, gains, and losses.

Then there's the politics of it all and whether people want to go after individuals when there's a populist attitude around the whole thing. It's going to be interesting to watch. Just when I got done with an months-long slog filled with the minutiae of presidential election laws and procedures, I'm pretty sure I'm going to learn a lot more about the market and the SEC than I ever thought I would.

Edited January 30, 2021 by idnib

[katilac]

1 hour ago, Spy Car said:

Keith Gill is a professional financial analyst who has made a boatload off this stock manipulation scheme. He is likely in a world of legal hurt. He should be IMO. 

Bill

Okay, but . . . it is perfectly legal to tell people which stocks you think are a good idea to buy, no? Aren't there newspaper columns and TV shows with that very premise?

[Bootsie]

2 hours ago, Murphy101 said:

Everyone I know would say pay me in USD.  They would not go get a loan for it bc if the customer doesn’t pay they’d end up twice screwed.  I think the only people who even think of doing like you suggest are the kind of wealthy that won’t be hurt losing a million so figure why not risk it.  Most people don’t have the luxury of being comfortable with that kind of risk taking. 
 

I’m not convinced that kind of risk taking makes for a more stable market overall. It also sounds like it would be the kind of market only a select few would be able to navigate.

Then the person who has to pay in USD has to take the risk of exchange rate changes and could take similar types of hedging strategies.  These type of strategies are important risk management for almost anyone in international business.

[Bootsie]

2 hours ago, idnib said:

I'm getting in late to the conversation and somehow I can't get that quote above to be  below me. I own GME and I've been following the Reddit folks on and off this week so I thought I'd chime in.

 

I was under the impression that some firms (not sure who) were grandfathered in when naked shorting was made illegal. Do you know if this is the case?

 

I am not aware of any firms being grandfathered in with regards to naked shorting.  There are, however, instances in which firms can be in a naked short and not be in violation of securities laws.  That basically has to do with the clearing of securities from trades.  That really has to do with some technical issues of how long it is before the stock is actually in your possession and what happens if the person you are borrowing from fails to fulfill their end of the contract.  So, the general idea is that you cannot short stocks you do not have control over.  

[Spy Car]

8 minutes ago, katilac said:

Okay, but . . . it is perfectly legal to tell people which stocks you think are a good idea to buy, no? Aren't there newspaper columns and TV shows with that very premise?

Not if those people have money invented in the stocks they are plumping. Total conflict. 

Bill

 

 

 

[idnib]

Just now, Bootsie said:

I am not aware of any firms being grandfathered in with regards to naked shorting.  There are, however, instances in which firms can be in a naked short and not be in violation of securities laws.  That basically has to do with the clearing of securities from trades.  That really has to do with some technical issues of how long it is before the stock is actually in your possession and what happens if the person you are borrowing from fails to fulfill their end of the contract.  So, the general idea is that you cannot short stocks you do not have control over.  

So it sounds like if they were naked shorting it was illegal then? It sounds like something they held for a while, not a clearing of securities.

[katilac]

1 minute ago, Spy Car said:

Not if those people have money invented in the stocks they are plumping. Total conflict. 

Bill

So when the TV guy advises buying certain stocks, he can't own or buy them himself, is that right? 

[idnib]

2 minutes ago, katilac said:

So when the TV guy advises buying certain stocks, he can't own or buy them himself, is that right? 

I'm not sure that's always true. Although I can't remember the particulars I've seen over the years, sometimes people just have to disclose they have a position and what they position is. Some of it is probably about the law and some is about ethics and credibility.

[Bootsie]

16 minutes ago, katilac said:

Okay, but . . . it is perfectly legal to tell people which stocks you think are a good idea to buy, no? Aren't there newspaper columns and TV shows with that very premise?

Those newspaper columns and TV shows have to meet certain regulatory requirements.  So, the simple answer is you must be very careful about telling people which stocks you think are a good buy and not be crossing into illegal territory.  If you have a professional designation and hold the securities yourself, you will come under tighter legal scrutiny.  

[Bootsie]

1 hour ago, BeachGal said:

According to my son, who is a trader, they might try but are in murky water. It’s hard to say at this point what will happen.

Robin Hood, otoh, is manipulating the market but will probably not be affected due to their affiliations with high frequency traders (HFTs) some of whom now sit on the board of the SEC.

Other things are going on but we’ll have to wait to see what transpires.

Pensions and 401Ks are very unlikely to be affected. ERISA protects participants’ investments and works well.

This is likely to blow over but will be interesting to see how it unfolds.

What do you think Robin Hood is doing to manipulate the market? 

ERISA provides standards for retirement plans, but it does not protect the value of the investments made.  

[Bootsie]

13 minutes ago, idnib said:

So it sounds like if they were naked shorting it was illegal then? It sounds like something they held for a while, not a clearing of securities.

I have not heard anything about the hedge funds holding naked shorts in this situation.  The SEC provides this Key Points About Regulation SHO (sec.gov)information about naked short selling, giving some examples of legal naked short positions.

[idnib]

7 minutes ago, Bootsie said:

I have not heard anything about the hedge funds holding naked shorts in this situation.  The SEC provides this Key Points About Regulation SHO (sec.gov)information about naked short selling, giving some examples of legal naked short positions.

I haven't heard anything definitive either, just unsubstantiated rumors.

[Arcadia]

https://www.cnbc.com/2021/01/29/cramer-tells-investors-to-take-home-run-and-sell-gamestop.html
“At the same time, Cramer said he believes GameStop should be using the rapid appreciation in share price to issue new stock and potentially pay down debt. The company's fiscal fourth quarter ends Saturday.

As of Oct. 31, GameStop's balance sheet contained $269.5 million of short-term debt and $216 million of long-term debt, according to its fiscal third-quarter earnings release.“

[idnib]

I remembered the connection I mentioned in my first post that was bothering people. I personally find it too conspiracy-oriented, but I have to admit things seem a bit incestuous at the top.

Ken Griffin, who owns Citadel (hedge fund) gave Melvin Capital $2B this week in exchange for future revenues (exact terms not disclosed).

He also owns Citadel Securities, which is a market maker and  processes Robinhood's transactions.

Some people feel there's a conflict of interest. GME was climbing quickly when the lock announcement was tweeted, causing it to fall. But nobody on RH could take advantage of the dip because they were locked out of buying and only allowed to sell, which some did due to panic. Of course the HF traders were all fine. If Melvin Capital has short positions all the way down (which they must) or still needed to cover some shorts, that would be good for both Melvin and Citadel.

Robinhood also has kind of a sketchy reputation both for their SEC fine last year, their attempt to start a non-FDIC insured bank, and how frictionless they make it to make risky trades.

[Ausmumof3]

24 minutes ago, Arcadia said:

https://www.cnbc.com/2021/01/29/cramer-tells-investors-to-take-home-run-and-sell-gamestop.html
“At the same time, Cramer said he believes GameStop should be using the rapid appreciation in share price to issue new stock and potentially pay down debt. The company's fiscal fourth quarter ends Saturday.

As of Oct. 31, GameStop's balance sheet contained $269.5 million of short-term debt and $216 million of long-term debt, according to its fiscal third-quarter earnings release.“

I read this this morning and in itself it seems kind of manipulative.  Like - ok you’ve had fun now but get out while the going’s good because it’s going to crash.  Which may be good advice but it’s also kind of a self fulfilling prophecy.

[Ausmumof3]

3 minutes ago, idnib said:

I remembered the connection I mentioned in my first post that was bothering people. I personally find it too conspiracy-oriented, but I have to admit things seem a bit incestuous at the top.

Ken Griffin, who owns Citadel (hedge fund) gave Melvin Capital $2B this week in exchange for future revenues (exact terms not disclosed).

He also owns Citadel Securities, which is a market maker and  processes Robinhood's transactions.

Some people feel there's a conflict of interest. GME was climbing quickly when the lock announcement was tweeted, causing it to fall. But nobody on RH could take advantage of the dip because they were locked out of buying and only allowed to sell, which some did due to panic. Of course the HF traders were all fine. If Melvin Capital has short positions all the way down (which they must) or still needed to cover some shorts, that would be good for both Melvin and Citadel.

Robinhood also has kind of a sketchy reputation both for their SEC fine last year, their attempt to start a non-FDIC insured bank, and how frictionless they make it to make risky trades.

Apparently not just processes their transactions but something like 40pc?  Must admit I’m way over my head so might have that wrong.

[Ausmumof3]

1 hour ago, Bootsie said:

I have not heard anything about the hedge funds holding naked shorts in this situation.  The SEC provides this Key Points About Regulation SHO (sec.gov)information about naked short selling, giving some examples of legal naked short positions.

How would one find information on what they hold?  Because I’m seeing all sorts of things thrown around and no way of verifying anything. 

[Arcadia]

13 minutes ago, Ausmumof3 said:

I read this this morning and in itself it seems kind of manipulative.  Like - ok you’ve had fun now but get out while the going’s good because it’s going to crash.  Which may be good advice but it’s also kind of a self fulfilling prophecy.

His advice is more of if you have money to burn then continue your fun, else you might want to cash in while it’s good. 
I have worked in a company where the stocks got delisted. Employees who still had stocks basically would have a very hard time liquidating those stocks.

ETA: He is also saying GameStop can use this opportunity to issue new stocks and pay down debt.

Edited January 30, 2021 by Arcadia

[Bootsie]

4 minutes ago, Ausmumof3 said:

How would one find information on what they hold?  Because I’m seeing all sorts of things thrown around and no way of verifying anything. 

Are you asking about how you can find out the short positions that a hedge fund holds?  Hedge funds are not required to make that information public.  

The stock holdings are reported to the SEC via a 13F-HR report.  You can find the report for 

Melvin Capital Management Lp 2020 Quarterly Report 13F-HR (sec.report)

These are done quarterly so there is a delay and positions may have changed since the filing date.  This report shows Melvin holding a large PUT position for GameStop which gives them the option to sell GME at a particular price

[BeachGal]

1 hour ago, Bootsie said:

What do you think Robin Hood is doing to manipulate the market? 

ERISA provides standards for retirement plans, but it does not protect the value of the investments made.  

I’m relaying my son’s opinion, but he believes they should not have halted the buying of GME. He’s been checking numbers and trying to figure out what’s going on and thinks they’re concerned with delivery. Regardless, I don't think a lawsuit will get too far with them either.

True, ERISA does not protect the value of investments made but the standards are designed to prevent reckless investments which should help prevent losses from reckless investing. As a result of the standards, the fund managers tend to invest more conservatively. They have to follow rules and regulations and many are scrutinized by outside parties. My husband managed a retirement fund and said shorting stocks is not something that’s done. It’s extremely risky. I’m just saying this to ease posters’ fears about the possibility of someone shorting their retirement contributions.

I think Bootsie is familiar with ERISA but for anyone who is curious, here is a short article that explains more about the funding of retirement plans as well as a brief summary of your rights.

https://www.investopedia.com/terms/e/erisa.asp

[ieta_cassiopeia]

17 hours ago, Bootsie said:

I am not understanding the bolded.  How does the shorting of stock impact the plans for the company?  The stock price is an indication of what the "market" thinks of the company's plans.  But, the stock price does not dictate the implementation of a company's plans.  

Stock price can affect how much money is available to the company to effect the plans. This is because stock markets offer a different way to become a "customer" of a company, than buying product.

When a company sells shares onto the market in the first place, it receives money for them. However, the downside is that companies are generally expected to redeem those shares later at whatever the market deems "par value". This requires companies to have enough cash on hand to do so. Of course, most of the time, there are other buyers on the market for any given share, which means the company doesn't have to pay anything - unless whoever does buy it decides they need to sell at a point where no other buyers are willing to pick up the tab.

Moderate shorts don't (have to*) cause any change to company plans because there are still people buying and selling enough of the shares that company cashflow can pick up any shortfall at par - especially since the definition of "at par" changes with share valuation (that is to say, ). The problem comes if there is an extreme short, where everyone decides to sell at the same time and the company can't afford to buy back the shares. At that point... ...the company is out of money and can't pay for any plans that require cashflow. Plans like converting bricks-and-mortar stores require cashflow, having that cashflow restricted by a mass short would prevent the plan from going ahead. This is because tradespeople need to be paid money.

(Note: a company has to be trying pretty hard to get themselves into an "extreme short" situation - by problematic practises causing a instant mass drop in faith (which was a major component in the 2008 stock market crash), selling too many shares and therefore over-diluting the shares (I can't think of any big companies off-hand as examples, but an F1 team from 20 years ago called Arrows managed it) or by trying odd techniques in those share sales (allowing 40% more shares to be borrowed than actually exist, as Gamestop has, would fall into this category).

Most likely, the company will be forced into administration, Chapter 11 or some other highly restrictive method of restoring cashflow (e.g. high-interest loans or imposed corporate restructuring). Sometimes, companies go bankrupt if they are forced to pay for too much too quickly and requirements for making other cash-restoration methods cannot be met.

In other words, the reason mass shorting is a problem to the company is the same as for other reasons for failure of shares on a stock market.

* - I say "have to" change plan, because a company could look at shorting activity, decide it's related to some practice they should not be doing and change it. If the practice was actually harmful to the business, then this would be an example of when moderate shorting can be a healthy part of the stock market. Shorting is a tool that can cause both good and bad effects.

[Pam in CT]

Re who will emerge as having benefitted handsomely when all this artificial inflation returns to the ground

10 hours ago, Arcadia said:

https://www.cnbc.com/2021/01/29/cramer-tells-investors-to-take-home-run-and-sell-gamestop.html
“At the same time, Cramer said he believes GameStop should be using the rapid appreciation in share price to issue new stock and potentially pay down debt. The company's fiscal fourth quarter ends Saturday.

As of Oct. 31, GameStop's balance sheet contained $269.5 million of short-term debt and $216 million of long-term debt, according to its fiscal third-quarter earnings release.“

right, as evidently AMC actually did yesterday

13 hours ago, Pam in CT said:

[eyeroll]

Well HERE are two players that definitely won big out of the whole brouhaha. Hard to see either AMC or Silver Lake as "little people" in any kind of David & Goliath or Robin Hood narrative, but, every gamble does yield winners.

 

ETA  Curious now if Elizabeth Warren or SEC or other investigators ever really will try to dig down to the bottom of the stack of turtles nearly all the way down and unearth where exactly the Reddit pile-on really started.

 

It may not ever be possible to trace where the Reddit rumor really started.

But as the whole drama plays out, it's looking less and less like a Robin Hood narrative where the little guy sticks it to the big.

• Robinhood the medium-sized intermediary acted agilely (perhaps inappropriately) in the moment to protect itself. 
• The yuge hedge funds largely had the resources to wait the clearly-artificial moment out.
• At least two large companies, AMC and (private equity fund) Silver Lake, benefited handsomely by acting agilely in the moment to avail of the opportunity.

 

(click through that link to see Silver Lake's filing to the Securities Exchange Commission on how many (actual, not short) shares they managed to sell on the one day, 1/27, during the Reddit run-up)

• (I expect in the next few days we'll hear more and more stories like Silver Lakes', where large holders of the actual shares -- not shorts -- of the companies in the Reddit-fueled artificial run-up did extremely well)
• And some of the small retail day-traders newly into the game will do fine; and others will lose. 

As happens in gambling games. It's fine to gamble, just recognize that what you're doing is gambling: do it out of the entertainment budget rather than the rent money; and don't accidentally wander into doing it with borrowed funds and call commitments without realizing that that's what you've signed up to do.

But someone started the initial rumor and initial idea of Hey Guys Let's Stick It To the Hedge Funds run-up.  I am increasingly curious about who that was.  The ethics (and potentially the law) of the game are quite different depending on who it was.

[Bootsie]

5 hours ago, ieta_cassiopeia said:

Stock price can affect how much money is available to the company to effect the plans. This is because stock markets offer a different way to become a "customer" of a company, than buying product.

When a company sells shares onto the market in the first place, it receives money for them. However, the downside is that companies are generally expected to redeem those shares later at whatever the market deems "par value". This requires companies to have enough cash on hand to do so. Of course, most of the time, there are other buyers on the market for any given share, which means the company doesn't have to pay anything - unless whoever does buy it decides they need to sell at a point where no other buyers are willing to pick up the tab.

Moderate shorts don't (have to*) cause any change to company plans because there are still people buying and selling enough of the shares that company cashflow can pick up any shortfall at par - especially since the definition of "at par" changes with share valuation (that is to say, ). The problem comes if there is an extreme short, where everyone decides to sell at the same time and the company can't afford to buy back the shares. At that point... ...the company is out of money and can't pay for any plans that require cashflow. Plans like converting bricks-and-mortar stores require cashflow, having that cashflow restricted by a mass short would prevent the plan from going ahead. This is because tradespeople need to be paid money.

(Note: a company has to be trying pretty hard to get themselves into an "extreme short" situation - by problematic practises causing a instant mass drop in faith (which was a major component in the 2008 stock market crash), selling too many shares and therefore over-diluting the shares (I can't think of any big companies off-hand as examples, but an F1 team from 20 years ago called Arrows managed it) or by trying odd techniques in those share sales (allowing 40% more shares to be borrowed than actually exist, as Gamestop has, would fall into this category).

Most likely, the company will be forced into administration, Chapter 11 or some other highly restrictive method of restoring cashflow (e.g. high-interest loans or imposed corporate restructuring). Sometimes, companies go bankrupt if they are forced to pay for too much too quickly and requirements for making other cash-restoration methods cannot be met.

In other words, the reason mass shorting is a problem to the company is the same as for other reasons for failure of shares on a stock market.

* - I say "have to" change plan, because a company could look at shorting activity, decide it's related to some practice they should not be doing and change it. If the practice was actually harmful to the business, then this would be an example of when moderate shorting can be a healthy part of the stock market. Shorting is a tool that can cause both good and bad effects.

This is not at all my understanding of how stocks work. Stockholders are not customers of a company.  They are owners of the company. Just as if I take my money and buy a stove, building, etc. and start a bakery I am OWNER of the baker not a customer of the bakery. 

Second the market does not determine a stock's "par value" Par is an accounting value that is set when the company issues the stock.  it does NOT change as stock price changes in the market.   Companies do not have to have enough cash on hand to buy back their own stock and they do not have to buy back their own stock.  

If there were an extreme short, people would not be trying to SELL at the same time, they would be BUYING at the same time to cover their short.    

There is a way that this particular situation could impact GameStop but it is, in fact, the opposite of what is described here.  In December GameStop filed paperwork with the SEC to be able to sell new shares of GameStop (but did not have specific plans to do so).  If a company can sell new shares at $360 per share it raises a lot more money than if it can sell them at $18 per share.  So GameStop is in a position now of raising more dollars with less dilution of ownership than a few weeks ago. 

[Bootsie]

3 hours ago, Pam in CT said:

• (I expect in the next few days we'll hear more and more stories like Silver Lakes', where large holders of the actual shares -- not shorts -- of the companies in the Reddit-fueled artificial run-up did extremely well)
• And some of the small retail day-traders newly into the game will do fine; and others will lose. 

 

Institutional holdings represent about 35% of GameStop.  Another 13% is owned by insiders.  The executives who had stock options stand to benefit from this handsomely, also.  

[Ausmumof3]

There seems to be a number of Twitter bots responding to and retweeting stories as well.  (Name plus series of numbers plus recent account date plus only posting on this one thing).  Which makes me wonder if there’s a coordinated campaign behind it.

[Noreen Claire]

On 1/28/2021 at 1:39 PM, hjffkj said:

only if he sells before this crashes because it will.  My bet is most people who jumped on this bandwagon will not sell in time and will be stuck holding the bag

 

On 1/28/2021 at 2:13 PM, Arcadia said:

There is still short term capital gains tax on the earnings, as well as brokerage fees to take care of. Still it’s possible to earn big on shorting stocks. A friend who went from engineering to stock trading earned a few thousands per day (before tax) quite consistently but he is also a chain smoker from the stress.

He did cash out, but left in a bit to keep 'playing'. He's still a full-time student, and after the taxes he will put his newfound money on his school loans. Hes having fun learning about the stock market.

[Bootsie]

This article explains some of why Robinhood and other brokers limited trading in GME and other highly volatile stocks GameStop curbs put clearing houses under the spotlight | Financial Times (ft.com).

Buying on margin means that stock is purchased using some borrowed money.  So, if I have $15,000, my broker requires 50% margin, and GME is selling for $300 per share, I can purchase 100 shares ($30,000) of GME.  I own 100 shares and I owe my broker $15,000.  That is fine if GME keeps rising, I can eventually sell my stock, pay back my loan and pocket my profits.  The danger comes if GME starts dropping in price.  If GME drops to $200 per share, I now have $20,000 worth of stock and owe my broker $15,000.  The stock is now not enough collateral for a $15,000 loan and I will have a margin call.  The broker says I must place more cash in my account or sell the stock immediately to pay back the loan.  When markets are highly volatile higher margin requirements (lower loan amounts as a percentage of the purchase) are required. 

The broker is not like a store that is selling stock from its inventory.  It is acting as a matchmaker.  So, when I purchase shares of GME, they find a seller (often at another broker).  It can take a couple of days before the trade is cleared--meaning all of the accounting for the shares is done and the money is actually moved between the various brokers.  It is possible that there is a "failed" order.  RobinHood my find a seller, I buy the stock, it shows up in my account, but behind the scenes RobinHood has not actually received the stock from another broker.  The broker gives my account credit as if everything is going to happen like it is supposed to.  That afternoon I may decide to sell the shares of GME (which have not cleared my account) yet and the broker lets me do so.  But, there is a risk that there is a "failed" trade and the stocks never get to my account-- so the brokers have to maintain margin with the clearinghouse as collateral--to make sure that they can make good on their promises.  When a stock is extremely volatile and heavily traded the number of things that can go wrong multiply and the brokerage firm (like RobinHood) can find itself in a position that it has to deposit a significantly larger amount of cash with the clearinghouse as collateral for the clearinghouse to clear the firm's trades.   

 

 

[idnib]

On 1/30/2021 at 10:25 AM, Bootsie said:

There is a way that this particular situation could impact GameStop but it is, in fact, the opposite of what is described here.  In December GameStop filed paperwork with the SEC to be able to sell new shares of GameStop (but did not have specific plans to do so).  If a company can sell new shares at $360 per share it raises a lot more money than if it can sell them at $18 per share.  So GameStop is in a position now of raising more dollars with less dilution of ownership than a few weeks ago. 

My understanding is they have to give notice. Do you know how much?

It would be interesting if they sold new shares and what that price would be. My instinct tells me the higher they go (within reason) the less of a sell-off they avoid and the more money they have.

[idnib]

2 hours ago, Bootsie said:

This article explains some of why Robinhood and other brokers limited trading in GME and other highly volatile stocks GameStop curbs put clearing houses under the spotlight | Financial Times (ft.com).

That sounds about right. But my goodness they did a terrible job of explaining their situation and I think it will haunt them forever. Saying you can't deliver helps people understand, but it also makes you look like you're unreliable when other brokers like Vanguard and Fidelity are delivering.

[Carrie12345]

1 hour ago, idnib said:

That sounds about right. But my goodness they did a terrible job of explaining their situation and I think it will haunt them forever. Saying you can't deliver helps people understand, but it also makes you look like you're unreliable when other brokers like Vanguard and Fidelity are delivering.

I understand the explanation, but my brain is just like, um... perhaps margin shouldn’t be a thing if brokers can’t hack the risk??? You know, as opposed to blaming the people perceived as not understanding their own risks? 

[Bootsie]

1 hour ago, idnib said:

My understanding is they have to give notice. Do you know how much?

It would be interesting if they sold new shares and what that price would be. My instinct tells me the higher they go (within reason) the less of a sell-off they avoid and the more money they have.

I don't think that they have to give any notice beyond the SEC filings that were made in December.  The shares were to be sold "at the market" when means at whatever the current market price is.  GME would not choose a price to sell these shares for--they would just get to decide whether they sold the shares or not. 

The SEC filing allowed for them to sell a $X amount of stock (I don't remember the actual dollar amount).  But the higher the price is, the fewer the number of shares they need to sell to reach that $ amount.

[Bootsie]

26 minutes ago, Carrie12345 said:

I understand the explanation, but my brain is just like, um... perhaps margin shouldn’t be a thing if brokers can’t hack the risk??? You know, as opposed to blaming the people perceived as not understanding their own risks? 

There are really two instances in which the term margin is being used here.  One is the margin that the broker (RobinHood) is extending to the customer.  The stock is serving as collateral for a loan; as the collateral decreases in value, the loan from the point of the broker becomes more and more risky.  This is a standard part of the brokerage contract if someone has a margin account.

The other use of the term "margin" is what the broker has to have in place with the clearinghouse.  If this were not the case, when you sell a stock it would be a couple of days before you were able to actually get the cash and use it to purchase something else.  As volume and volatility increase the clearinghouse increases its margin requirement making it very costly for the brokerage firm to place orders for those securities.  

I am not sure where the link is with people being perceived not to understand their risk.  Basically, Robinhood is providing a service for customers to place an order--Robinhood's cost of providing that service went up dramatically making it not feasible to provide that particular service.  

[katilac]

On 1/30/2021 at 9:35 AM, Pam in CT said:

But someone started the initial rumor and initial idea of Hey Guys Let's Stick It To the Hedge Funds run-up.  I am increasingly curious about who that was.  The ethics (and potentially the law) of the game are quite different depending on who it was.

I'm not sure that it comes down to one 'someone' starting the initial rumor. I really think it might have been people posting about the short selling, and people reminiscing about Gamestop, add in thread drift and a bit of what if? and, bam! Thousands of people are buying Gamestop.

That's my head canon until evidence proves otherwise. 

[Bootsie]

GME is currently down about $90/share, or about 28%.  

[Ausmumof3]

2 hours ago, Bootsie said:

GME is currently down about $90/share, or about 28%.  

It seems surprising it held as long as it did.  It seems silver is the thing now.  

[Spy Car]

What we are witnessing is financial terrorism. 

Populism is a pox on humanity. Always has been.

Nothing to cheer here.

Bill

[Bootsie]

I set up a paper trading stock game for my college students last Wednesday with a $100,000 play money.  The top student in the class this afternoon is up over $130,000--mostly from some moves he has made in GME.  But, at the other extreme, I have had a student who is down to just over $50,000, losing about 1/2 of his money since Wednesday from trying to trade GME.  They are getting a first-hand view of how volatile and risky that can be.  I am glad they are doing it with play money.

[Moonhawk]

3 hours ago, Ausmumof3 said:

It seems surprising it held as long as it did.  It seems silver is the thing now.  

Redditors are upset that this silver thing  is a thing: it seems most/all of the posts promoting silver on Reddit have been from bots. There are also claims that there are ads being put there that are either about silver, and also ads that Melvin has already resolved its GME position (the question being, why put that as an ad?). Both r/stock and WSB are irritated at this and no one is claiming to actually be taking a silver position. They don't know why it's being reported as another Reddit movement. 

Hold Position is still the word on the GME stock from WSB, everyone is still stating this is the position to take ("Diamond Hands" hold it strong). They are saying that the trading volume is low, the trades to bring down the price are hedge funds passing a limited amount back and forth, to quote, " do not worry about the dip in today's price because it's a short ladder attack ... But it's literally not working because everyone is holding. ... Patience!!!" *

*Moonhawk is neither agreeing nor asserting this as the truth. Moonhawk is just reporting from Reddit as faithfully as possible. This is not financial advice.

Edited February 2, 2021 by Moonhawk

[Ausmumof3]

2 minutes ago, Moonhawk said:

Redactors are upset that this silver thing  is a thing: it seems most/all of the posts promoting silver on Reddit have been from bots. There are also claims that there are ads being put there that are either about silver, and also ads that Melvin has already resolved its GME position (the question being, why put that as an ad?). Both r/stock and WSB are irritated at this and no one is claiming to actually be taking a silver position. They don't know why it's being reported as another Reddit movement. 

Hold Position is still the word on the GME stock from WSB, everyone is still stating this is the position to take ("Diamond Hands" hold it strong). They are saying that the trading volume is low, the trades to bring down the price are hedge funds passing a limited amount back and forth, to quote, " do not worry about the dip in today's price because it's a short ladder attack ... But it's literally not working because everyone is holding. ... Patience!!!" *

*Moonhawk is neither agreeing nor asserting this as the truth. Moonhawk is just reporting from Reddit as faithfully as possible. This is not financial advice.

Love your disclaimer !!!

I believe it about the bots, there is a lot of bot activity on Twitter around it.  One wonders how vulnerable the financial markets are to foreign interference with misinformation campaigns etc.

[Bootsie]

15 minutes ago, Moonhawk said:

Redactors are upset that this silver thing  is a thing: it seems most/all of the posts promoting silver on Reddit have been from bots. There are also claims that there are ads being put there that are either about silver, and also ads that Melvin has already resolved its GME position (the question being, why put that as an ad?). Both r/stock and WSB are irritated at this and no one is claiming to actually be taking a silver position. They don't know why it's being reported as another Reddit movement. 

Hold Position is still the word on the WSB, everyone is still stating this is the position to take ("Diamond Hands" hold it strong). They are saying that the trading volume is low, the trades to bring down the price are hedge funds passing a limited amount back and forth, to quote, " do not worry about the dip in today's price because it's a short ladder attack ... But it's literally not working because everyone is holding. ... Patience!!!" *

*Moonhawk is neither agreeing nor asserting this as the truth. Moonhawk is just reporting from Reddit as faithfully as possible. This is not financial advice.

Am I understanding this correctly that they are saying the trading volume is low on GME? Its volume today was almost 37 million shares.  A month ago, most days it was below 10 million shares.  It is lower than it was over the past week, but considering that the float is less than 47 million shares, I wouldn't consider that to be low volume.  

[Moonhawk]

3 hours ago, Bootsie said:

Am I understanding this correctly that they are saying the trading volume is low on GME? Its volume today was almost 37 million shares.  A month ago, most days it was below 10 million shares.  It is lower than it was over the past week, but considering that the float is less than 47 million shares, I wouldn't consider that to be low volume.  

Yes.

------

Posts/comments asserting low trading volume and short ladders (picking the most relevant):

This is what holding the line looks like! Look at that volume. Diamond-Hands keep it up!

15 U.S.C.A. § 78i - the Illegality of Short Ladder Attacks (Legal insight)

Why $GME short interest appears to have fallen when in reality it has not.

NO MORE SHARES TO SHORT

How come no one is talking about the DUPLICATE charts of GME / AMC today? This was completely coordinated Every Dip and Every Peak Lined up perfectly

-------
Encouraging others to keep holding:

Millions in GME calls bought today at ~$800. HOLD!

It needs to be said louder and more often. WE ARE KILLING IT.

GME volume still low with positive CMF which means retards keep holding

Today wasn’t a bloodbath for $GME or $AMC. WE watched LITERAL insanity as Hedgies sat and traded their trash BACK and forth to each other in order to cause YOU to panic. HOLD. BUY.

500k loss today. STILL HOLDING. <-- lots of posts like this, including u/Deepf*******value's post. He normally does end-of-month only, from my memory. I also saw guy saying $10M down for him, still holding, bought more.

At these levels, it's NOT about the price of the stock. It is the number of shares in the hedge funds' possession. That's why they want you to sell.

"As of January 29th GME stock is still the most heavily shorted stock in the market, with a short interest of 121.07%"Volume has not increased enough to cover shorts. Trends are following very closely to Thursday. We're still go for a moon mission, boys.

I bought at 320. I don’t care. Posting fake silver news was the last straw. I will hold, and we will all bleed together.

-------

Claims of media bias/manipulation:

Fake News [Img of TV saying "retail traders low interest in Gamestop"] 

Bloomberg now insisting GME is "old news." HA! Pathetic last ditch effort. We got em by the balls now, HOLD

Lol they're putting up ads now [img of Ad to buy silver]

THEY ARE LYING STRAIGHT TO OUR FACE. DON’T BELIEVE THIS GARBAGE. [img of TV saying "from games opt to silver, reddit fueled frenzy continues"]

------

Again, I am only a messenger. No need to tell me I'm wrong about any of this, because I am a vessel, pouring itself out for you. 🙂 

It just seems, if we are talking about what's happening, it's good to see what the actual scuttlebutt is from the ones who are posting on a public forum, with no PR involved.

Edited February 2, 2021 by Moonhawk

[Bootsie]

35 minutes ago, Moonhawk said:

Yes.

------

Posts/comments asserting low trading volume and short ladders (picking the most relevant):

This is what holding the line looks like! Look at that volume. Diamond-Hands keep it up!

15 U.S.C.A. § 78i - the Illegality of Short Ladder Attacks (Legal insight)

Why $GME short interest appears to have fallen when in reality it has not.

NO MORE SHARES TO SHORT

How come no one is talking about the DUPLICATE charts of GME / AMC today? This was completely coordinated Every Dip and Every Peak Lined up perfectly

-------
Encouraging others to keep holding:

Millions in GME calls bought today at ~$800. HOLD!

It needs to be said louder and more often. WE ARE KILLING IT.

GME volume still low with positive CMF which means retards keep holding

Today wasn’t a bloodbath for $GME or $AMC. WE watched LITERAL insanity as Hedgies sat and traded their trash BACK and forth to each other in order to cause YOU to panic. HOLD. BUY.

500k loss today. STILL HOLDING. <-- lots of posts like this, including u/Deepf*******value's post. He normally does end-of-month only, from my memory. I also saw guy saying $10M down for him, still holding, bought more.

At these levels, it's NOT about the price of the stock. It is the number of shares in the hedge funds' possession. That's why they want you to sell.

"As of January 29th GME stock is still the most heavily shorted stock in the market, with a short interest of 121.07%"Volume has not increased enough to cover shorts. Trends are following very closely to Thursday. We're still go for a moon mission, boys.

I bought at 320. I don’t care. Posting fake silver news was the last straw. I will hold, and we will all bleed together.

-------

Claims of media bias/manipulation:

Fake News [Img of TV saying "retail traders low interest in Gamestop"] 

Bloomberg now insisting GME is "old news." HA! Pathetic last ditch effort. We got em by the balls now, HOLD

Lol they're putting up ads now [img of Ad to buy silver]

THEY ARE LYING STRAIGHT TO OUR FACE. DON’T BELIEVE THIS GARBAGE. [img of TV saying "from games opt to silver, reddit fueled frenzy continues"]

------

Again, I am only a messenger. No need to tell me I'm wrong about any of this, because I am a vessel, pouring itself out for you. 🙂 

It just seems, if we are talking about what's happening, it's good to see what the actual scuttlebutt is from the ones who are posting on a public forum, with no PR involved.

Thanks for linking these--I don't keep up with Reddit and all of the social media. 

I looked at their charts and they are comparing volume to the extraordinarily GIGANTIC volume from the last few days and not comparing it to typical (over the past few months) for GME or with what is a reasonable about of volume compared to other stocks.  

It is also a little worrisome to see how some can throw around some jargon like they know what they are talking about but be incorrect on some basic things.  😞  

[Ausmumof3]

https://www.bbc.com/news/technology-55888782
 

Elon Musk seems to be taking an interest.  He’s known for causing some crazy share market stuff with his tweets.

[Bootsie]

This morning GME is down over $100 per share--more than 50%, and volume seems to have picked up relative to yesterday.  

[idnib]

I headed over to read the Mark Cuban AMA and he thinks it's basic supply and demand, but the demand was abruptly cut off when Robinhood stopped letting people buy and only sell, which I think is a good argument in line with basic economic principles, which can be in short supply(!) there. That lead to lower prices, which lead to margin calls, and so on. He said he doesn't own GME, but thinks people should hold if they can afford to because Redditors are in the process of transferring to other brokers or are waiting for Robinhood to open it up freely again, at which point it would be beneficial the price is low.

He said he buys based on certain things about the stock and as long as those things don't change, he doesn't sell depite price changes. If they do change, he re-evaluates. That said, I have no doubt he does more homework than the average Redditor.

He is also pretty clear that the SEC isn't going to help, that it's technically not market manipulation because the rules are so in favor of the hedge funds, and that lawsuits against Robinhood will probably succeed and everyone will get $4.

Edited February 2, 2021 by idnib

[Arcadia]

8 hours ago, Ausmumof3 said:

Elon Musk seems to be taking an interest.  He’s known for causing some crazy share market stuff with his tweets.

Elon Musk has an interest in anything and everything. His tweets are just good for entertainment value if you don’t mind his kind of humor.

[Ausmumof3]

1 hour ago, Arcadia said:

Elon Musk has an interest in anything and everything. His tweets are just good for entertainment value if you don’t mind his kind of humor.

Lol well probably true.  But they still send people kind of crazy over stuff.  I’m not sure what the word is for that.  The other week he tweeted something about a messaging app and lots of people misinterpreted and went and bought shares in a medical company with the same name.  It’s like a cult or something!