As has been mentioned above, there are hedge funds who have short-sold stock that they don’t own for a fraction of what it is worth today, thinking they would “buy it back cheap” and make their usual profit.

They are not getting many good night sleep at the moment.

So what’s the endgame? Once they get bored and sell their overpriced stock? Jump on the next crazy bandwagon?

That’s my question…

WSB basically set a “financial landmine” to catch out the naughtiness of fund managers that like shorting weakened companies.

The thing is that when the price dives most of those “regular people” are going to dump their overvalued stock and make a killing themselves. And the funds who’ve held their position will still make their money, the other question is, who’s money are those funds gambling with? A reasonable chunk is going to be “regular people’s” savings and pensions as well as some rich people’s investment fund deposits…

I’m not sure the end game will actually hurt the intended targets as much as hoped, and I don’t even know if it will serve as a deterrent to funds choosing to short weakened companies in the future… But it does highlight how broken and corrupted the investments industry is as a whole. Unfortunately it’s still seen as a cornerstone of modern capitalism…

Isn’t this just the future that thatcher predicted where “share ownership is as common as owning a car” ? The folk who took advantage of the financial Big Bang and adopted the slopiest of slope shaped shoulders when it all went pear shaped in ‘08 can hardly complain that it’s “vulnerable  pensioner’s money..” that’s being gambled

No, but the pensioners might complain a bit…

TBH it’s not GME hitting a silly high value that’s acts as a shorting deterrent it would arguably be better to slightly inflate the stock price and try to hold it there for as long as possible to run out the clock on the short positions.

Which was the real goal right?

BREAKING: Elon Musk loses "richest man in the world" title to TigBitties420_x

— manny (@mannyfidel) January 27, 2021

Thanks for the explanation superficial. Otherwise it seems like it would be all about spite, which wouldn’t seem the smartest reason to make an investment! Not that I have any sympathy for hedge fund managers. The video above was helpful too.

😆 (for the new richest man in the world post)

So what’s the endgame? Once they get bored and sell their overpriced stock? Jump on the next crazy bandwagon

I’d have thought the [partial] answer to that was obvious..

Bitcoin. Surely a significant proportion of the geeks’ profit will go digital currency.

Bradley Cooper…its always Bradley Cooper

Surely a significant proportion of the geeks’ profit will go digital currency.

What profit?

They’ve massively inflated the price of a low value asset mainly because they can. Once they start trying to realise that profit, the share price will crash back down to it’s real value. A few who get out early might make a profit but the majority will find they have massively over paid for the stock and will make a loss. The only question is when this happens…

Twice. Reminds me a bit of that weird Volkswagen thing a few years ago. 2008?

That was egregious, there was a false market created in the shares because of Porsche’s massive off book interest in the shares. Many people cheered at the time because hedge funds “bad”, but what Porsche did would have been against the rules in countries with more developed systems.

What trading platforms are you guys using?

What profit?

They’ve massively inflated the price of a low value asset mainly because they can. Once they start trying to realise that profit, the share price will crash back down to it’s real value. A few who get out early might make a profit but the majority will find they have massively over paid for the stock and will make a loss. The only question is when this happens…

I just typed out something very similar to this…

up over 20% in pre market,

Skyrocketing again in pre-market trading. Are we tipping into the squeeze proper now?

A few who get out early might make a profit but the majority will find they have massively over paid for the stock and will make a loss. The only question is when this happens…

About an hour after the vocal few who’ve pushed this dump their stock.

It’s a variation on pump and dump using people’s dislike of hedge funds and the market to drive up a worthless stock in place of false positive statements.

I’ll eat my hat off half the people looking to have made a huge chunk on this aren’t the very people 99% of small investors think they’re betting against.

But maybe I’m too much a cynic.

The people piling in now to push it higher are going to loose a lot of money! You can only suspend reality for so long; the market will correct it eventually.

The people piling in now to push it higher are going to loose a lot of money!

It’s possibly new investors, but the idea of the squeeze is you eventually force the Hedge Funders to pile in to sort their positions, and that sends it mental. Went from 450 to 500 while I was typing this.

I’d have thought most of the small HFs have got out, the big ones can probably ride it out as they know it will eventually correct, just a matter of who folds first. The Redditers will loose interest eventually, it’s a dull as dishwater stock so unlike, say Tesla, there is no possibility of an upside to this.

the big ones can probably ride it out as they know it will eventually correct

I know sod all about this so very happy to be corrected… Reuters reporting that Melvin Capital (who I guess are pretty big players?) pulled out, with rumoured losses of 30% off their total value, which has got to add up to billions?

Which was the real goal right?

At this stage there seems to be several goals.
Genuine belief it was worth (a bit) more than it was and so buy shares which has a minor side affect of a tiny hit to some hedge funds.
Some is playing the short squeeze and hope the hedge funds fold first for profit.
Some short squeeze simply to try and hurt the hedge funds.
Some that the bubble is still rising so might as well make a few quid by jumping in and out.
Some that they have seen it on the news.
Some that they saw Musk tweet about it (last time he mentioned Signal chat app a completely unrelated company called signal something else saw a jump in their shares).
Some just as a hobby at the moment.

But it does highlight how broken and corrupted the investments industry is as a whole. Unfortunately it’s still seen as a cornerstone of modern capitalism…

I understand the sentiment of that point but not what the formal accusation is.

Should short selling not be allowed or is it just hedge funds that shouldn’t be allowed to do it?

It’s long been argued that short-selling performs a necessary function by punishing the overvalued stocks.

with rumoured losses of 30% off their total value, which has got to add up to billions?

Well, whoever owns the stocks right now is going to be almost totally wiped out if they remain long.

It’s a very interesting phenomenon; a kind of crowd-sourced vulture fund able to take on the hedge funds by pressing into service Reddit hype and some financial instruments. Who has bought all the overvalued stock though? Hedge funds are out so that just leaves the redditors who arrived late as the marks, right?

It’s long been argued that short-selling performs a necessary function by punishing the overvalued stocks.

Absolutely the point of the market is to find the ‘right’ value of assets. That means things can go up in value and also down. Shorting a stock is a perfectly valid thing to do. If the shorter is wrong they loose money, if they are right they make money as the asset genuinely was over valued.

What the Redditors are doing is barking mad, but that’s their perogative to spend their money as they see fit ie buying a massively over valued stock. The Hedge Funds knew the rules of the game, this was always a risk.

Shorting is also a benefit to trackers, it helps them keep the fees low as they earn money lending out stocks to people who wish to short them. A tracker has no choice it which stocks it owns, it justs buys in accordance with the proportion in the market its tracking eg FTSE 100 etc.

Who has bought all the overvalued stock though? Hedge funds are out so that just leaves the redditors who arrived late as the marks, right?

The stocks probably come from a Tracker.

The Hedge fund loans the stock and sells it, having agreed to repay the Tracker in shares in the future.

The Hedge fund waits till one of three criteria have been met:
1. The stock has fallen and they can see a big profit
2. The stock has risen and they can’t take the (theoretical*) losses
4. Their loan agreement is coming up to the end of its term

At which point they buy the same number of shares they originally loaned and sold and return them to the tracker.

The original owner gets a fee for the loan. The Shorter either makes a profit or loss depending on how the share price did.

* theoretical as they are not realised till they close their position

Should short selling not be allowed or is it just hedge funds that shouldn’t be allowed to do it?

I think the Hedge Funds argument is that they should be allowed to do it (and make massive amts of money) but “those other people” shouldn’t be.

That pretty much sums it up to me

The stocks probably come from a Tracker.

Yeah but the price was paid by the hedge funds to repay the trackers right?

I’m just curious as to how much the Redditors needed to ‘bump’ up the price before the hedge funds committed this positive-feedback Harakiri loop, or indeed if some of the massively inflated price has been paid by online marks in addition.

I think the Hedge Funds argument is that they should be allowed to do it (and make massive amts of money) but “those other people” shouldn’t be.

That pretty much sums it up to me

I don’t know the particular rules, but in general, there are rules against coordinating actions on the stock market, i.e, institutions aren’t supposed to coordinate. It’s in the spirit of anti-trust type rules I guess?

The subreddit and online hype are more like a kind of flashmob in my view. It’s a kind of organised chaos.

Well from my point of view shorting sucks. I have shared in the US company I work for and it has been shorted to a lesser degree than GameStop. Ok our results have not been outstanding but the share price has dropped by half since I got them.
To the question above about the end game, simple, greed. And that applies to hedge funds, Reddit forum users and of course yours truly 😂

Will be very interesting to see what happens when the market opens, a lot of Redditors were posting they had sells set-up at $420.69 (meme number…) so if it opens above that it could trigger a flurry of sales. Whether that’s enough for enough other people to lose their bottle and start dumping I don’t know. Whilst that would be the usual thing that would happen to a vastly over-inflated stock, in this case there’s supposedly a large volume of short positions due to expire at the end of the month so there’s incentive for the Redditors to keep their stock until then (to hit the hedge funds hard).

Had a phonecall from my sister-in-law yesterday. Apparently our 23 year old nephew has had a lot of money (10s of thousands) in GME and similar stocks for a while and is now a paper millionaire. I hope to god he’s sold them now.

It depends what investments people made. If you had $1000s then you’d get nervous but twitter suggests there are huge numbers of people with small amounts. They’d probably be happy to risk losing $100 just to see what happens.

Given this is now all over the internet I wouldn’t be there will also be other people entering the game trying to ride the bubble up.

there are rules against coordinating actions on the stock market,

yes there are, isn’t it remarkable how a number of Hedge Funds all independently decided to short one particular stock…

there are rules against coordinating actions on the stock market,

How do you define coordinated action?

Eg a tipster tips a stock in the Telegraph and Telegraph readers then buy it – is that coordinated action?

Next step, the tipster tips it on the Telegraph online and people on their website forum buy the stock – is that coordinated action?

Someone posts on STW, let’s take down Blackrock by bumping a stock…

Had a phonecall from my sister-in-law yesterday. Apparently our 23 year old nephew has had a lot of money (10s of thousands) in GME and similar stocks for a while and is now a paper millionaire.

amazing 😀 hopefully he thinks fondly of good old uncle dazh 🤣

It’s the combination of shorting allegedly 140% of the number of shares, trying to manipulate the market by consistently talking trash about the company and picking GameStop, a company that for many is somewhat dear to their hearts.

This hedge fund represents the kind of fund that has screwed with many commons people’s life. Hence the sentiment aspect of it.

Had a phonecall from my sister-in-law yesterday. Apparently our 23 year old nephew has had a lot of money (10s of thousands) in GME and similar stocks for a while and is now a paper millionaire. I hope to god he’s sold them now.

Unless he’s a millionaire (which at 23, I doubt), why would he have any money in GME, let alone 10s of thousands? Or does he work there and they are stock options?

This hedge fund represents the kind of fund that has screwed with many commons people’s life

But fundamentally, if the company is sound and correctly valued, the short will either fail or be pretty inefective. Shorting only works when the company is genuinely over valued – in which case the shorting process is just speeding up the inevitable.

Does remind people that you should invest in a diversified portfolio, so the loss of any one stock won’t make a big difference.

But fundamentally, if the company is sound and correctly valued, the short will either fail or be pretty inefective. Shorting only works when the company is genuinely over valued – in which case the shorting process is just speeding up the inevitable.

Not saying shorting is bad. What I am saying is that this company represent the overly aggressive and greedy Wall Street types that have screwed with people’s lifes. Or at least that is the perception. Is it correct? I don’t know, however it is hilarious seeing a multi-billion investment banking firm crying out wolf.