Yeah I don't claim to understand the stock market. I'm confused as to how this scheme works or how the billionaire stockbrokers were taking advantage of Gamestop.
From what I understand, wsb owned a lot of low value Gamestop stock. The redditors who organized, dumped money in to it. When the price climbs, it doesn't also climb for wsb?
Gamestop is a bad company - they had bad fundamentals as a company (the whole movement to internet retail, etc.), they were likely going under if nothing changed.
Institutional Investors/Hedge Funds (Melvin Capital) make their move - saw this and decided to hasten the process and began short selling the stock, which means that they sold shares of stock that they didn't have, with the plan to buy it back at a later date at a better price (they can use some shady strategies to do this such as ladder selling, but that's too complicated for this discussion, they also profit from some options activity around the sell off)
Gamestop is still a bad company - This is a problem for GameStop because they can't issue shares to raise some capital to keep themselves afloat, restructure, imrpove stores, etc. This increases the likelihood of bankruptcy
Hedge Funds/Others get greedy - They shorted the stock so much that they literally sold more than then entire number of shares available (140% of available shares)
WSB notices how crazy this is - they saw that there is an opportunity for a short squeeze if they buy and hold and the idea is promoted continually on the site for a few months
WSB makes a move - they gained critical mass and bought the stock up enough that it gained critical mass, others likely hopped in (momentum traders etc.).
Shorts getting squeezed - This creates huge losses for Melvin (~3B initially, not sure where it is now). They said they sold off their position, but the short interest remains strong at 140% of shares
What happens from here is anybody's guess, there have been some other things happening (Robinhood disabling trading on GME, politicians sounding off, SEC investigation, etc.). But if the WSB crowd can buy and hold enough, they will eventually cause the shorts to cover and make money because shorts have to pay interest to the brokerage on their short positions, and interest is very high (it was around 80% last time I checked, could be over 100% now).
The shall not guy above is right, this isnt your typical pump and dump. And wsb guys may or may not end up holding the bag, but I'm not sure they care
Yeah I don't claim to understand the stock market. I'm confused as to how this scheme works or how the billionaire stockbrokers were taking advantage of Gamestop.
From what I understand, wsb owned a lot of low value Gamestop stock. The redditors who organized, dumped money in to it. When the price climbs, it doesn't also climb for wsb?
No. They don't own the stock. Only a promise to sell it in the future for the low value.
They have to buy sky high to sell low.
But they also sold more stock than exists. So they'd have to do it several times.
Isn't Jesus supposed to have flipped some tables and made a scene over that type of shit?
They don't own the stock, so they're selling stock owned by the people who own these hedge fund collections of stocks?
The hedge funds need to buy stock to be able to sell it.
140% of all issued shares need to be sold to clear this debt.
Here's my two cents:
Gamestop is a bad company - they had bad fundamentals as a company (the whole movement to internet retail, etc.), they were likely going under if nothing changed.
Institutional Investors/Hedge Funds (Melvin Capital) make their move - saw this and decided to hasten the process and began short selling the stock, which means that they sold shares of stock that they didn't have, with the plan to buy it back at a later date at a better price (they can use some shady strategies to do this such as ladder selling, but that's too complicated for this discussion, they also profit from some options activity around the sell off)
Gamestop is still a bad company - This is a problem for GameStop because they can't issue shares to raise some capital to keep themselves afloat, restructure, imrpove stores, etc. This increases the likelihood of bankruptcy
Hedge Funds/Others get greedy - They shorted the stock so much that they literally sold more than then entire number of shares available (140% of available shares)
WSB notices how crazy this is - they saw that there is an opportunity for a short squeeze if they buy and hold and the idea is promoted continually on the site for a few months
WSB makes a move - they gained critical mass and bought the stock up enough that it gained critical mass, others likely hopped in (momentum traders etc.).
Shorts getting squeezed - This creates huge losses for Melvin (~3B initially, not sure where it is now). They said they sold off their position, but the short interest remains strong at 140% of shares
What happens from here is anybody's guess, there have been some other things happening (Robinhood disabling trading on GME, politicians sounding off, SEC investigation, etc.). But if the WSB crowd can buy and hold enough, they will eventually cause the shorts to cover and make money because shorts have to pay interest to the brokerage on their short positions, and interest is very high (it was around 80% last time I checked, could be over 100% now).