I'm not an expert or a novice at this stuff, but I do understand the basic concept.
So, let's pretend.
I run a hedge fund.
I make money off throwing money around. A lot of times this is other people's money.
So, you have this stock. It's Gamestop. Gamestop is shit, has been for over a decade. It's stock has been SLOWLY but consistently trending down in value. You hold this stock and really can't sell it because you'll take a huge loss on it. Better hold it and hope for a rebound at this point.
My firm comes to you and says, hey, I will lease that stock from you. You still own it but for the term of the lease, we can do what we want with it (including trade it, as long as we get the stock back to you before the lease ends) and when the lease is over, we WILL give it back to you. You make some money leasing the stock, which is better than making 0 on it from just holding it.
Meanwhile, what I'd like to do with my newly leased stock, is sell it right away. It's value is drifting DOWN. I want to sell it while it is as high as possible to get the most money I can for it. My hope is that by the end of my lease, the stock will be as low as possible. Why? Well, I gotta buy it back to return it to you. And I HAVE to buy it back because in my lease I agreed I would return it and other laws and rules etc.
So to recap (and lets make up some low numbers to help)
-I lease bad stock very cheap.
-I made it so my lease is for 6 months because I predict that is when the stock will drop to it's lowest possible value)
-I sell it at $100 per share (and for this example we'll stay at 1 share.)
-Boom! I made $100 (minus the tiny % from the lease I gotta pay, so like $93).
-6 months is coming to an end...Gotta return your stock.
-I buy the stock for $2 to $3 a share.
-I give it back to you.
-I netted around $90 a share over my lease (The $93 from a few points above minus the cost of rebuying)
-All without using my money or stock.
People saw the gamestop lease was about to end and dumped a lot of money into gamestop stock to get the mandatory buyback price as high as possible. The firm has got to buy back that stock to return it to the owners, and right now the price to buy stock is VERY high.
I'm probably asking the wrong question because I don't really understand how the stock market works, but could this be done to Facebook? I guess what I'm asking is could something similar be done to Zuckerberg that would cause a massive loss of confidence in his shitty company and cause it to faceplant if not completely crash and burn?
There's $527B of facebook stock out there, and it's only shorted 1% (you want 50%+ for this, preferably 80%+, gamestop was at 120%)... so not really, no.
Plus, the assholes at facebook own facebook stocks, not facebook shorts, so if we did do this to them they'd just make a boatload of money.
I'm not an expert or a novice at this stuff, but I do understand the basic concept.
So, let's pretend.
I run a hedge fund.
I make money off throwing money around. A lot of times this is other people's money. So, you have this stock. It's Gamestop. Gamestop is shit, has been for over a decade. It's stock has been SLOWLY but consistently trending down in value. You hold this stock and really can't sell it because you'll take a huge loss on it. Better hold it and hope for a rebound at this point. My firm comes to you and says, hey, I will lease that stock from you. You still own it but for the term of the lease, we can do what we want with it (including trade it, as long as we get the stock back to you before the lease ends) and when the lease is over, we WILL give it back to you. You make some money leasing the stock, which is better than making 0 on it from just holding it.
Meanwhile, what I'd like to do with my newly leased stock, is sell it right away. It's value is drifting DOWN. I want to sell it while it is as high as possible to get the most money I can for it. My hope is that by the end of my lease, the stock will be as low as possible. Why? Well, I gotta buy it back to return it to you. And I HAVE to buy it back because in my lease I agreed I would return it and other laws and rules etc.
So to recap (and lets make up some low numbers to help)
-I lease bad stock very cheap.
-I made it so my lease is for 6 months because I predict that is when the stock will drop to it's lowest possible value)
-I sell it at $100 per share (and for this example we'll stay at 1 share.)
-Boom! I made $100 (minus the tiny % from the lease I gotta pay, so like $93).
-6 months is coming to an end...Gotta return your stock.
-I buy the stock for $2 to $3 a share.
-I give it back to you.
-I netted around $90 a share over my lease (The $93 from a few points above minus the cost of rebuying)
-All without using my money or stock.
People saw the gamestop lease was about to end and dumped a lot of money into gamestop stock to get the mandatory buyback price as high as possible. The firm has got to buy back that stock to return it to the owners, and right now the price to buy stock is VERY high.
I'm probably asking the wrong question because I don't really understand how the stock market works, but could this be done to Facebook? I guess what I'm asking is could something similar be done to Zuckerberg that would cause a massive loss of confidence in his shitty company and cause it to faceplant if not completely crash and burn?
There's $527B of facebook stock out there, and it's only shorted 1% (you want 50%+ for this, preferably 80%+, gamestop was at 120%)... so not really, no.
Plus, the assholes at facebook own facebook stocks, not facebook shorts, so if we did do this to them they'd just make a boatload of money.
Maybe not FB, but if somebody can advertise Soros backed hedge funds we may have a lot of fun!