Context. A variety of politicians and commentators across the political spectrum made statements in support of those driving up the price of GameStop and other stocks, as well as against Robinhood and other companies' decision to limit these trades, including Alexandria Ocasio-Cortez,[189] Senator Ted Cruz,[190] Representatives Ro Khanna,[191] Ted Lieu,[192] and Rashida Tlaib,[193] Fox Business host Charles Payne,[194] and conservative political commentators Rush Limbaugh,[195] Ben Shapiro,[196] and Donald Trump Jr.[197][198], Senator Elizabeth Warren criticized both the short sellers and the buyers, and argued that more regulation was needed. Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide | Committee Repository | U.S. House of Representatives", "In GameStop Saga, Robinhood Is Cast as the Villain", "US lawmakers focus ire on Robinhood in GameStop recriminations", "Robinhood, Citadel CEOs Grilled by Lawmakers in Wake of GameStop Saga", "Robinhood customer files class action suit over GameStop trading restrictions", "Class-action lawsuit filed against Robinhood for restricting trading", "Investors are using this app to automatically join the Robinhood class-action lawsuit amid GameStop chaos", "This App Lets You Automatically Join the Robinhood Class Action Lawsuit", "Robinhood customer sues trading app over GameStop restrictions", "Robinhood Faces Anger, Class-Action Suits And Political Pushback After Curbing Trade Of GameStop", "Customers sue Robinhood Financial over stock trade suspensions", "Colorado man files federal lawsuit against Robinhood and other stock trading platforms", "Robinhood Now Faces Over 30 Class-Action Lawsuits for Blocking Stock Buys", "After GameStop stock frenzy, Tampa firms join rush to sue Robinhood trading app", "SEC Urges Company Disclosures on Fundraising During Market Frenzy", "SEC Warns Companies About Stock Price Volatility Disclosures", "Sample Letter to Companies Regarding Securities Offerings During Times of Extreme Price Volatility", "Wall Street Transaction Tax Gets Fresh Look After GameStop Frenzy", "After the GameStop fiasco, momentum builds for an $800 billion tax", "GameStop Frenzy Emboldens Supporters of Stock-Trading Tax", "Robinhood Says it Will Reallow GameStop Trades", "Gotta admit it's really something to see Wall Streeters with a long history of treating our economy as a casino complain about a message board of posters also treating the market as a casino", "A leading progressive Democrat slams Robinhood's move to restrict trading on some stocks after Reddit-fueled surge", "The dramatic rise in GameStop stock price raises the question to me of whether there is any societal value to shorting stock? +46 8 446 85920 News | Media . 556863-5972. [103][104] GameStop CEO George Sherman owns over 2.3 million shares in the company, according to Bloomberg News. This is a two-part series on the GameStop stock short squeeze and how it unfolded in the eyes of Queen’s students. The company secured a revenue share deal on all digital game purchases for Xbox Series X and S for each product sold by the retailer, meaning the company is moving away from dependency on selling games burned onto discs. I am the head mod at r/GME. Posted by 2 months ago. Members of the r/WallStreetBets community were credited with driving the momentum of buying stocks in GameStop. A short squeeze occurs under a set of unique conditions that cause a stock or financial asset’s price to appreciate rapidly due to an imbalance of supply and demand. [145] On January 28 and 29, the price of silver rose 10 percent. Keith Gill, known by the Reddit username "DeepFuckingValue" and the YouTube and Twitter alias "Roaring Kitty",[13][14][15] purchased around $53,000 in call options on GameStop's stock in 2019 and saw his position rise to a value of $48 million by January 27, 2021. That’s what happened in the GameStop short squeeze. [65] However, on January 31, Robinhood announced it had removed several of these restrictions and would only limit the sale of eight securities. GME has a float of roughly 50m shares. Ryan Cohen, the founder of the world’s largest online retailer for pet supplies, Chewy, which he ultimately sold for US$3.35 billion, bought a 13% stake in GameStop, making him the largest individual shareholder. What happened last week with GME stock price and option was a combination of a gamma squeeze [1] and infinite short squeeze [2]. The hearing had testimonials from Vlad Tenev (Robinhood), Gabriel Plotkin (Melvin Capital), Steve Huffman (Reddit), Ken Griffin (Citadel), as well as a high profile member of the Reddit r/wallstreetbets community Keith Gill, who goes by the pseudonyms of Roaring Kitty and DFV. [22][97] In an interview, he claimed that the company had covered the majority of its short positions in the range of $90 per share at a loss of 100 percent, retaining a small, manageable position. [199] She also called for stronger regulatory action from the U.S. Securities and Exchange Commission "to ensure that markets reflect real value, rather than the highly leveraged bets of wealthy traders or those who seek to inflict financial damage on those traders. [49] After the markets closed, Robinhood announced it would begin to allow "limited buys" of the affected securities starting the following day, although it was unclear what "limited buys" entailed. Optimize for integrity whenever possible because integrity compounds and assholes will fuck you. GameStop stock rose more than 1600% in two days. If there is bullish momentum, the shorts start experiencing a drawdown, the more the price increases, their unrealised losses grow and more margin required to maintain their position. Maybe not", "BlackRock may have raked in $2.4 bln on GameStop's retail-driven stock frenzy", "GameStop frenzy helps fuel sharp gains for Morgan Stanley fund", "Koss family got $32 million from Reddit-fueled stock market frenzy – more than the company was worth at the end of 2020", "As GameStop stock crumbles, newbie traders reckon with heavy losses", "GameStop Investors Who Bet Big—and Lost Big", "How the 'SaveAMC' campaign caused the movie theater company's stocks to soar", "American Airlines spikes 31% as Reddit traders direct their attention toward another heavily shorted stock", "Bankrupt Blockbuster Joins Reddit-Inspired Retail Rally", "Bed Bath & Beyond, AMC rally with GameStop as little investors squeeze hedge funds in more stocks", "Stock Investors Are Hunting for the Next GameStop on Reddit and Twitter", "GameStop mania may have ruined this hot Wall Street trade", "Why Virgin Galactic, Palantir, Kodak, Genius Brands, and Other Heavily Shorted Stocks Soared Today", "It isn't just GameStop: Here are some of the other heavily shorted stocks shooting higher", "Virgin Galactic (SPCE) and iRobot (IRBT) among stocks rallying in assault on shorts", "Koss Stock Up Over 1,000% In Three Days", "Not Just GameStop: Here Are The Meme Stocks WallStreetsBets Traders Are Pumping Up During This 'Extremely Erratic' Reddit Rally", "Reddit Ignites Mall Stock and Fund Cashes Out $500 Million", "NAKD Stock: Naked Brand Shares Rocket Fueling $1 Compliance Dreams", "Why Is National Beverage Surging 27% Higher Today? [56][233][234] Bloomberg News had previously reported that 40 percent of Robinhood's revenue was derived from selling customer orders to market-making firms including Citadel Securities and Two Sigma Securities, in a practice known as payment for order flow. Dude everyone thinks I'm crazy, and I think everyone else is crazy. Necessary cookies are absolutely essential for the website to function properly. Gaming the options market makers. Vote. [40] The value of AMC Networks (ticker symbol: AMCX) also increased significantly, which was believed to have happened because of the stock's name being similar to AMC's. https://www.reddit.com/r/wallstreetbets/, After GameStop's stock closed up 92.7 percent on January 26, business magnate Elon Musk tweeted "Gamestonk!! [47], On January 28, Robinhood halted purchases of GameStop, AMC Theatres, BlackBerry Limited, Nokia Corporation, and other volatile stocks from its trading platform; customers could no longer open new positions in the stock, although they could still close them. If you are wondering why it’s possible to borrow more shares than what is available, here is a quick explanation: Almost the entire float has been shorted for months. Why? [144] On February 1, the price of silver hit an eight-year high as GameStop shares continued their volatile tendency, with trading[which?] This makes it a perfect candidate for a short squeeze if the borrowers must give back the shares they had borrowed (also known as covering your short). [54] Some users alleged that Robinhood was selling shares without consent; Robinhood denied these allegations. A gamma squeeze is created when options dealers must aggressively hedge their short options exposure. [219] More generally, it was recognized that Wall Street was now subject to the same populist vigor (afforded by Internet connectivity) as the entertainment industry, politics, and so on. There may be a considerable risk of losses on the currency spot market and all transactions using Scandinavian Capital Markets SCM AB are at risk of capital loss. I’m going to go long and make them buy the stock back even higher,’” Colas said. [162][163], Texas Attorney General Ken Paxton said he would also investigate the decision of brokerages to limit the buying of securities related to GameStop and other stocks, saying that it "stinks of corruption". I'm not sure there is. Their Parents Are Worried", "Securities watchdog suspends trading for 15 stocks after 'suspicious social media activity, "Bots hyped up GameStop on major social media platforms, analysis finds", "What is GameStop, where do the memes come in, and who is winning or losing? [111] Mudrick Capital Management made a profit of close to $200 million in January 2021 on its holdings of AMC debt, and a profit of $50 million writing call options on AMC and GameStop stock. As a member of the Financial Services Cmte, I'd support a hearing if necessary. Citadel and Point72, two other prominent hedge funds, bailed out Melvin Capital by lending almost $3 billion to the now struggling hedge fund. [103] GameStop Chair Kathy Vrabeck and board member Raul Fernandez sold shares from January 13 to 16, making $1.4 million, and likewise, board member Lizabeth Dunn cashed in $156,700. The consequence of disabling trading was killing all momentum in the market, leading to a rapid decline in price. Do you agree? 1- Short interest — short interest is how much of the stock’s publicly available float have been borrowed and sold on the open market. Gaming the options market makers. That jump caused large multi-billion dollar short-selling hedge funds to short GME and AMC stock with the assumption that they’d continue to fall after their bumps. This is important because if the price goes up enough beyond your short, you will be forced to cover you short position by buying the underlying security at whatever price you can get it at. [204], In a CNBC interview, Reddit co-founder Alexis Ohanian compared the rally to Occupy Wall Street, saying that "it's a chance for Joe and Jane America—the retail buyers of stock—to flex back and push back on these hedge funds. GameStop Corp. is an American video game, consumer electronics, and gaming merchandise retailer. His investigation has extended to 13 entities, including Discord, Robinhood, the trading platforms Interactive Brokers and TD Ameritrade, and Citadel Financial. They borrowed GameStop, put up a margin requirement, immediately sold their shares, and waited for GameStop prices to drop (before eventually re-purchasing and returning the borrowed shares). [103] Three BlackBerry executives sold nearly $1.7 million of the company's stock, with one of the executives, Chief Financial Officer Steve Rai, selling all of his shares in the company excepting unvested employee stock options. [94] Melvin ended January with more than $8 billion in assets after having started the year with roughly $12.5 billion in assets. Who Wins When Short Sellers, Social Media, and Retail Investors Collide”. The price of many other heavily shorted securities also increased. The company is headquartered in Grapevine, Texas (a suburb of Dallas), United States, and is the largest video game retailer worldwide.As of January 30, 2021, the company operated 4,816 stores including 3,192 in the United States, 253 in Canada, 417 in Australia and 954 in Europe under the GameStop, EB … If you short a stock at 5 and the stock goes to 10, you then have to buy the stock at 10, in effect losing the 5 point spread between your short price and the actual price. [7], However, in September 2020, Ryan Cohen (the former CEO of online pet food retailer Chewy) revealed a significant investment in GameStop and joined the company's board, leading some to believe that the stock was undervalued. In which case my initial reaction is that it's awesome Reddit users and others are sticking it to hedge funds. Just got off the phone with a broker at Schwab; 1:45pm PT, Saturday. [72][73][74], On February 24, GameStop share prices doubled in heavy volume in the final 90 minutes of trading, with the company's stock halting twice, shortly before closing at $91.70, a 104-percent gain. How Interest Rates Affect The Value Of Currencies, How Biden’s Policies Could Influence North American Currencies. March 12, 2021; Kaitlyn Danielle; The Lazy Economist talks Gamestop stock. Gamestop (GME) and (AMC) are two failing companies who’s stocks got a bump in the market due to some recent good, but ultimately inconsequential news. All of those years of High Frequency Traders front running retail traders,now speed and density of information and retail trading is giving the little guy an edge. [108], Hedge fund manager Senvest Management, which had previously bought a five percent stake in GameStop when shares were at $10, made a profit of $700 million, exiting its position after Elon Musk tweeted "Gamestonks!". Gme Infinite gamma squeeze explained. Other co-owners of the Charlotte Hornets with Jordan also experienced heavy losses due to short positions on GameStop, being forced into tens of billions of dollars of debt as a result. Close. [81], On March 24, the GameStop stock price fell 34 percent to $120.34 per share after earnings were released and the company announced plans for issuing a new secondary stock offering; yet the stock price remained up more than 500% for the year, far surpassing the median analysts' target estimate of $25 per share.[82]. Wait, there’s more? Firstly, ~75% of the stock was locked up in passive funds that don’t trade. The shares of GME Resources, an Australian mining company with Australian Securities Exchange (ASX) symbol GME, increased more than 50 percent during intraday trading, closing with a 13.3-percent increase on January 28. Short squeeze is a term used by market participants to refer to a phenomenon where short sellers in a stock who have placed their bets on a stock’s fall, rush to hedge their positions or buy the stock in the event of an adverse price movement, in order to cover their losses. In the months that followed, Cohen and his firm RC Ventures beefed up the board of directors, introducing new key personnel with strong IT and e-commerce backgrounds. 1- Short interest — short interest is how much of the stock’s publicly available float have been borrowed and sold on the open market. [37][36], The r/wallstreetbets Discord server was banned on January 27 for violating the company's restrictions on hate speech. Stocks heavily shorted by speculators anticipating the price to fall using derivatives like options are prime to be squeezed. ", "Silver price hits eight-year high, as GameStop shares fall back", "Reddit users say they are not behind Monday's silver squeeze", "Redditors divided on shift to push up Silver", "Silver price surges amid investor frenzy — but Reddit users say it isn't them", "Silver is surging but users on WallStreetBets say they're not behind the rally", "Biden administration 'monitoring the situation' with GameStop's stock, White House says", "Exclusive: Treasury's Yellen calls top regulator meeting on GameStop volatility, consults ethics lawyer", "Yellen to Meet Financial Regulators Thursday on Market Tumult", "Regulators Meeting on GameStop Frenzy Are Unlikely to Find Systemic Risk", "Pelosi says Congress will be part of GameStop scrutiny", "Breaking: Incoming Chairman @SenSherrodBrown's response to the current state of the stock market", "Private investors deserve to know Wall Street and hedge funds are not engaged in malicious behavior when the pendulum swings in favor of private investors, not corporate cronies. I'll post the update tomorrow as I always do after data readouts. The initial trade setup was not a short squeeze play but rather a long-term contrarian play based on the company’s merits. [83] By March 24, short interests had dropped to 15 percent, compared to the 141 percent level at its peak in January. We now need to know more about @RobinhoodApp's decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit. The GameStop WallStreetBets Short Squeeze Explained In Simple Terms. Posted by just now. Hedge fund Melvin Capital needed a $2.75 billion bailout on Monday after the stock price for GameStop, the video game retailer, spiked to more than $70 a share over the weekend. Actor and rapper Ja Rule, who had used Robinhood since 2014, said what the company did was "a fucking CRIME"[213] and called the situation "an uprising". [71][72] As the stock prices continued to decline, some of the recent investors held on to their shares, and suffered significant losses. [100] According to Morgan Stanley, a number of hedge funds covered their short positions and sold shares in their portfolio to reduce leverage and market exposure, in some of the largest such actions within 10 years. So there is a massive amount of shares in this GameStop short squeeze. The suit alleges Gill misrepresented himself as an amateur investor to inflate the stock price. This is in contrast with taking a long position (simply owning the stock), where the investor's loss is limited to the cost of their initial investment. Several high-profile US policymakers and business magnates condemned Robinhood and other broker’s actions of preventing average citizens access to an open-market. [87], As of January 31, executives at BlackBerry and GameStop had sold more than $22 million in stock since January 1. While technically true, the community is not about making political statements but rather making as much money as possible as quickly as possible, hence the name Wall Street Bets. Citadel Securities stated that they did not instruct any brokerage to suspend or otherwise limit trading, and Robinhood denied that it had been pressured by Citadel. This makes it a perfect candidate for a short squeeze if the borrowers must give back the shares they had borrowed (also known as covering your short). Gme Infinite gamma squeeze explained. Dissimilar to Volkswagen's 2008 escapade, the modern-day short squeeze was more dramatic. We use cookies to personalize content, to provide social media features and analyze our traffic. [167][168][169] Representative Brad Sherman accused Griffin of trying to evade his questions. It made the options sellers hedge their positions by buying GME 2. You should consider carefully whether such investments are appropriate to you, taking into account your financial assets. [165][166] On February 18, the House Financial Services Committee, chaired by Representative Maxine Waters, held a remote hearing titled Game Stopped? Since derivatives are contracts, similar to an IOU (I owe you), short interest can exceed … And when you see a stock chart go parabolic — when the price goes straight up a huge amount — that’s an indication the shorts are getting crushed. And in fact, if Melvin Capital has shorts on (outside of the puts they own) they will be hosed. The GME Stock Trading Frenzy, Explained. [15][16][17] Gill, a 34-year-old marketing professional and Chartered Financial Analyst (CFA) from Massachusetts, stated that he began investing in GameStop during the summer of 2019, after believing the stock to be undervalued. Approximately 140 percent of GameStop's public float had been sold short, and the rush to buy shares to cover those positions as the price rose caused it to rise even farther. [41] Disruptions and restrictions limiting trade have been reported on multiple brokerages such as Charles Schwab Corporation, its subsidiary TD Ameritrade, and Robinhood. Today, S3 estimates short interest has fallen by half over the last week, taking pressure off the price swings. The community collaborates on conducting due diligence on contrarian trading ideas. Schwab GME Proxy. Should GME shareholders HOLD and buy the dip, it will likely set up a secondary gamma squeeze later on in 2021/2022. The GME Stock Trading Frenzy, Explained. Here’s how the GME short squeeze is explained. Dozens of class action lawsuits have been filed against Robinhood in U.S. courts, and the U.S. House Committee on Financial Services held a congressional hearing on the incident. [20], Suggested factors included anger of some investors towards Wall Street hedge funds for their role in the financial crisis of 2007 and 2008,[21][16][22] or the general democratization of the stock market coupled with the ability of retail traders to communicate instantaneously through social media. "[218] Barstool Sports founder David Portnoy also criticized Robinhood for its lack of "free trading". It is published for information and marketing purposes. They also questioned whether Robinhood was encouraging its customers to take excessive risks in order to generate a profit and whether it had the appropriate infrastructure and funding to handle influxes of new clients. 3 7 3 2 6. [169], A Robinhood customer filed a class-action lawsuit against the company on January 28 for halting trading on GameStop. WallStBets celebrated Melvin Capital’s loss, and the effort to continue to … There are several factors that can contribute to major moves in a stock's price and one of them is the classic short squeeze. [142], Following the stock market surge, futures for silver began to rapidly increase as well,[143][144] although later news reports clarified that it was unclear who was behind the rise. [236][237] As Robinhood restricted trading of GameStop shares, users alleged that Citadel Securities directed Robinhood to do so. [98] Due to the enormous losses, Left stated that Citron Research would discontinue offering short-sell analysis after 20 years of service, and instead focus on "long side multibagger opportunities for individual investors". [needs update], On January 28, the House Financial Services Committee announced that it would convene a hearing to discuss online trading platforms. Source: Yahoo Finance / GameStop Corp (GME) 5-Day Price Chart – 27 Jan 2021. [167][168], In February 2021, Deadline Hollywood reported on Netflix's plans to develop a movie based on the events, with Mark Boal in negotiations to write and Noah Centineo set to star in the film. This makes it a perfect candidate for a short squeeze if the borrowers must give back the shares they had borrowed (also known as covering your short). [2][3], Short sellers are exposed to a risk of short squeezing, which occurs when the shorted stock jumps in value due, for instance, to a sudden piece of favorable news. The GME Short Squeeze Explained Anyone that has an Instagram account (please follow ours) or watches the news has likely heard by now about the great Gamestop Short squeeze this week. [178][179], A lawsuit was filed in a court in Massachusetts by securities class action firm Hagens Berman Sobol Shapiro on behalf of an investor against Keith Gill. Wait, there’s more? [227] Menlo Park police reported ten separate incidents related to protests at Robinhood headquarters from January 28 to February 9, including a man throwing animal feces at the building's front door. When short sellers decide to close their put contracts, they also become buyers. The Mother Of All Short Squeezes, or MOASS for short, is how the impending once-in-a-lifetime squeeze of GameStop Corp (NYSE: GME) shorts is being refereed.And rightfully so. [223], Disgruntled users review-bombed the Robinhood app on the Google Play Store after it halted the trading of GameStop securities, pushing its ratings down to one star. [18], On January 27, 2021, technology news website Mashable reported that the subreddit had broken pageview records due to the short squeeze, receiving 73 million pageviews in 24 hours. [112] The trading led to increase in the stock of the Koss Corporation, and by selling stock the executives and directors of the company were able to earn $45 million, which was more than the company was valued in 2020. CNN reported that the drop was partly due to restrictions imposed by Robinhood and other brokers on the number of shares that could be purchased at once by their clients. The community is known for discussion around high-risk stock transactions. Considering the already fierce online competition, pandemic related lockdowns and declining footfall harmed the company’s prospects. As many short … [62] On January 30, Robinhood announced it had increased the restrictions from the sale of 13 securities to 50, including companies such as Rolls-Royce Holdings and Starbucks Corporation. In the GameStop short squeeze, Melvin and Citron (and possibly others) shorted GameStop’s stock. Almost the entire float has been shorted for months. [167][168] Representatives focused their attention on Robinhood's role in the event, asking Tenev why the brokerage had limited the trading of some securities and if it had clearly communicated its business model to its customers. [29], Later analysis by a cyber security company of social media posts suggested that thousands of automated bots may have hyped GameStop stock, Dogecoin, and other stocks, on social media. You also have the option to opt-out of these cookies. The GameStop Short Squeeze. [84], On March 25, the stock rose 53 percent from its previous day's decline of 34 percent. The historic gains have, by at least one account, so far come without much help from the great short squeeze. Approximately 140 percent of GameStop's public float had been sold short, and the rush to buy shares to cover those positions as the price rose caused it to rise even farther. (Short selling is when someone borrows shares at a higher price then sells it with the … Press question mark to learn the rest of the keyboard shortcuts. At various points during his initial testimony and questioning, Gill made references to memes. ", "This is beyond absurd. In this video I go over the new SEC rule that will change how stocks will start to be shorted. In the case of GME where so much of the stock was shorted, if a bit of good news came out and the stock price started to rise, short sellers would try to buy stocks to cover their positions and minimize losses. The data was described by Bloomberg News as "potentially an early sign that the short squeeze that propelled GameStop... has progressed. [56][233][234][238], During the February 18 hearing held by the House Financial Services Committee, Citadel CEO Kenneth Griffin and Robinhood CEO Vlad Tenev faced questioning regarding their relationship and denied that the limits imposed on the trading of GameStop shares had been requested by Citadel.
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