So let me begin by saying this: I am in on the GME squeeze, yes. I have been in since early December. I have made 5 figures so far on an initial buy-in under 10k, will soon be 6 figures, and... we'll see. I am (legally required to mention that I am) not a financial adviser, and nothing I say here should be construed as advice nor direction. This is simply data for you to understand what's going on technically for the stock market action, and the larger implications.
So, we'll begin with a definition of short selling. Short selling (shorting) is the borrowing of shares from a broker, with the promise that you will pay back in-kind (with as many shares as you borrowed), and if you don't pay back within a certain timeframe you begin paying interest on it. Shares are lent from brokers (to use a very simple example, Robin Hood, yes, the app). Only big money hedge funds and financial institutions are allowed to short, it's financial shit.
Anywho, if you're quick on the draw you'll understand the implications. Shorting is for when you believe* a stock is going down. If you borrow a share from a broker that's trading for... 10 bucks and short sell it, you pocket 10 bucks then and there. You then stand to gain as much as you buy it back for after the price goes down. If, for example, you buy the share back when the price has dropped to 5, you turn in that share back to your lender and now have netted 5 bucks. The maximum gain for this example is 10 bucks, i.e. the company bankrupts and their shares are worthless. I say "believe" with an asterisk, because there's a caveat. We'll come back to that.
On the flipside, shorting has what's called an "infinite downside". This is because, if you hold till the bitter end (which most shorts won't), the price of the stock could theoretically go to infinitely-high levels. So if you short that 10 dollar stock, and it climbs to... 15 bucks by the time you're margin called and asked to return the share, you MUST buy back the share at 15 bucks, market value, or else pay an interest value based on the stock's current value to the lender.
Stay with me, we're going balls-deep into market shit here. I promise I'll keep it simple.
So, shorters (such as the oft-mentioned Melvin Capital) tend to have HUGE pools of liquidity. They can afford to take an interest hit if they think they can hold through the upward trend of the stock (past their initial short position) till the point where it goes back under and they can buy back, or "cover", that share at a profit, or at least a break-even point.
Here's where that caveat comes in that I mentioned, and point 1 of my thread: The trick is, all these hedge fund cats have a huge fucking network of contacts in the MSM and politics, and will utilize them, either when they first short or when they're in trouble, to run hit pieces on the company they shorted, explaining why the price it's at is WAAAY too high! They may or may not (illegally) also do shit like do a massive sell-off, or get someone else with large pools of money to burn (known as whales) to do so. This normally scares off normie investors, who will see the downward trend and sell at whatever they can to mitigate losses.
So, the shorts basically are pocketing the losses from Joe Blow the novice trader, and... well, in my opinion, creating NOTHING of value. Their money literally comes from scaring people and creating pessimism. Fuck that. Moving on.
In particular regards to Gamestop, we need to set the scene for what's going on with the company. Like most brick-and-mortar places, the Kung Flu hit them hard, and they took a tumble down to single-digit stock values. Shorts saw this and, knowing GME was just another strip mall retailer, figured their time was coming and they were gonna be bankrupting before too long. So they shorted it at, oh, 20 as it was going down during the beginning of the Coof.
But then, they got greedy. I won't get into the technicals here, because it would require an entire fucking new thread to explain, but they did something called "naked shorting" to short more shares than actually exist. They leveraged shares held in call options (again, not gonna explain it, look elsewhere), basically promising to lenders "hey, I know you don't ACTUALLY have this stock and if the option holder exercises they'll need 100 shares, but I promise I'm good for it!" So they got MORE shares, these ones being "implied", and shorted AGAIN on those, say at 15. Then GME STILL kept dropping. Cool, make every fucking cent they can. Short some more. Etc. etc.
Okay, so that's fine and well, they shorted literally more stocks than GME even had available for trade, but (biiiig but) if GME went bankrupt, as they earnestly believed, it wouldn't fucking matter, because they wouldn't have to pay back shares if the company no longer existed.
Enter Player 1: Michael Burry (of Big Short fame.)
Burry saw what was going on, and he's been on the winning side of short positions before. Now, there's something to be said for shorts against scum like Enron. Short sellers DO provide a value in driving down the value of companies that don't deserve their money. I won't argue that. Problem is, looking at GME's finances, they were NOT on the track to bankruptcy. They were hurting, sure, everyone hit by the WuFlu was, but they were far from filing Chapter 11.
So Burry bought shares (or call options, can't remember which), a sizable enough amount that it kept the stock from hitting the ground. Now, this already fucked with the shorts, because remember, they were now all-in on GME bankrupting. They would never admit as much, since naked shorting is illegal and all, but yeah, they were. But by chugging along, even if barely on a lifeline, GME's survival was... troublesome to say the least.
Enter Player 2: Ryan Cohen (of Chewy fame.)
You may or may not have heard of Chewy. Depends on if you have a pet or not. But short version is, they're an online pet supply company that Cohen ran really fucking well, selling them to Petsmart for... 2 and a half bil, I think it was? Anyways, he made the company work on the e-commerce platform. And... he joins GME. GME, mind you, is of course traditionally a brick-and-mortar physical retailer, but consider the sentiment caused by an e-commerce guru deciding to roll the dice on GME. Was he gonna fix them? Completely dominate the online video game retail market? Maybe, maybe not, that's not super relevant. The main and important point is, the POSSIBILITY that he COULD made GME look good again.
Their stock price starts going up. Uh-oh for the shorts.
Enter Player 3: Q32020 Earnings and New Console Cycle
Okay, so what just happened in the video game world? PS5 and whatever the fuck the new Xbox, Series X Mark 2 Mod 5 or whatever, is called came out. Hey, hate them all you want, GME provides those consoles that millenials and zoomers want. That ALONE would keep GME solvent for at least a year or so. But their Q3 report came out, and... yeah, they took a hit from the Shanghai Shivers, but they actually didn't do nearly as badly as other companies. Actually did fairly decently. They're closing a bunch of redundant extra locations, and they have decent cash-on-hand keeping them in the green(ish). Worse and worse for the shorts. Some have now left their single-digit stock price short positions, the juice isn't worth the squeeze. But not the biggest fish in the hedge funds. They shorted at 10-20, and GME was still right there at this point in time, last November. They can weather the storm. At least till break-even. No losses in THEIR portfolios!
Enter Player 4: Wall Street Bets, /biz/, StockTwits, and various other retail (individual) trader social media.
Okay, GME is on the uptick, but... I mean, Cohen's good, but he's no miracle worker, right? GME WILL go down! Except some retards on various financial forums (WSB being the largest source), even as early as a fucking YEAR ago, saw the ridiculously high short ratio and saw writing on the wall. I understand there's also apparently a whole sentiment about "muh nostalgia", but that may or may not be the point. Anyways, WSB is already well-known for being a bunch of dumbfuck millennials who yeet six figures into random stocks and options as a fucking joke. They have a LOT of money to burn. But this time... this was no meme. Buying up the shares means the shorts have to buy from them. As a refresher, the shorts MUST buy shares to return, they cannot pay cash-in-kind or whatever the fuck. And if the ONLY people holding shares are a bunch of memeing fucktards... limited supply, extremely high demand.
And so... the short squeeze began. Really began running about when I bought in, right after thanksgiving weekend (after the Q3 report came out and showed they were actually doing just fine, relatively speaking). What you must understand here is, no, there is no "next GME". This is basically it. This is literally documentary-tier history. Hedge funds banked on GME going into the fucking dirt, and the populist left, populist right, and a fuckton of Karen and Steve normies on Robin Hood bought a share or two. And every single share counts. Every single share some rando of RH owns, every 10 thousand shares a WSB whale holds, EVERY SINGLE SHARE is being held by people who leave the shorts with no choice to buy from them. In other words... shareholders dictate the price. We (myself included, as I said) will sell them at whatever fucking price we choose, and they will pay it, even if they must liquidate all of their other assets and bankrupt the hedge funds. We don't fucking care.
Shorts who fuck over scams like Enron are good, fine, they devalue companies that don't deserve it; but not shorts who literally made money off of thing like the scamdemic (as GME was just one example), fucking over other people and taking their money. Dunno why they hit GME in particular as a brick-and-mortar, maybe because of the digital game marketplace being stronger (compare AMC, not nearly as heavily shorted but also a meme stock, I guess it's because the theater experience is kinda its own thing?).
And right now, the MSM, Big Wall Street, all these fuckers, are absolutely LIVID. THEY'VE been gaming the market sentiment for decades, and they got nice fancy econ degrees from ivy leagues and wear suits to work! They DESERVE it! But no, not a bunch of random... NORMAL PEOPLE on web forums and shit! And the fact that they so stubbornly held against the sentiment merely reinforced the will of all of us longs, because we're like "bro, just give up and cover your positions, it's over". Nope, instead they beg for CNBC to run endless hitpieces about how GME isn't worth X. But the thing is, we AREN'T TRADING ON GME'S ACTUAL WORTH. The stock value is being trade ON THE SHORTS' NEED TO COVER.
Basically, they've been making money off of other peoples' losses as long as they've been shorting companies that don't deserve it. And now that they're the ones being bent over, they're whining to the SEC to game the system for them, or the government to change the rules for them. They are facing bankruptcy based on this bet, and the idea that THEY could be so thoroughly fucked over by their lack of risk management terrifies them. They've been worth 7+ figures for years, decades for some of the oldest traders. The idea of losing it all is so horrifying, that they are pulling every dirty trick they can to keep us from winning.
So yes, a bunch of the WSB people are fucking commies. And I don't fucking care right now. We have a common enemy here, the scum that have been sucking value out of working-peoples' pockets for years on end. If they wanna turn around and give it all to some trans rights charity or some shit, I don't care. Our paths diverge when this fight is over. But until then? All the hedge funds can go fuck themselves. They got money from the banks that were bailed out in '08.
We want our fucking money back.