Merged Wall Street Bets subreddit / Too late to buy Gamestop stock?

[JoeMorgue]

I had a (sarcastic, non-serious lest any pearl clutching starts) observation during the last round of stimulus checks that given how the government is treating people giving them just enough money to buy a gun wasn't the best plan.

I wonder if this is a near real world version of that.

"Ah yes we will gives the peasants just enough money to last a few more weeks... and they are using it to short-circuit our stock shorting plan."

 

[lomiller]

TBF Gamestop was, and still is, probably heading for bankruptcy. The shorters are just hastening their demise. That said, they are making money off other peoples misfortune. If GME could at least make it to the end of the pandemic they'd have a better chance of finding a buyer to keep their stores open.

Short selling doesn't make the bankruptcy come any faster. It normally drives down the price closer to it's real value. People that own the stock don't like this because they want to sell it before the price collapses.

Think about that for a min. People own stock they know is worthless in the long run and want to sell it to someone else to take the loss. How ethical is that? How would you feel about a used car salesman that has a car with serious drive train problems that will be on the scrapheap soon and tries to hide the problems so they can sell it at full price.

Short selling gets a stigma because they make money when other people are loosing money, so it's easy to believe "they are the ones who took my money" but this isn't really the case. Short sellers keep the losses from being even larger.

When short sellers start to abandon the markets, as they are currently, it's a good indicator the market is entering a bubble. In fact they pay a role in preventing such bubbles in the first place, so the fact they exit the market causes the bubble to accelerate. When the bubble collapses many people will lose a lot of money, they will be economic chaos and probabaly a recession.

 

[catsmate]

For individual investors. You can bet your ass that as long as NASDAQ allows GME to be traded, the big firms will have no trouble doing so. I have no desire to see Internet trolls win at anything, but this is clearly a class war and the upper class is deploying their nukes.

Mmmmmm, maybe. Or not.
It's interesting to see who's actually profiting on a large scale. And it isn't small investors.

 

[lomiller]

As an aside, we don't know if the people buying the stock are the same people advocating doing it. We don't know how many people running their mouth to buy it bothered to buy it (even if they said they did).

It doesn't matter. Both are illegal.

 

[lomiller]

If some authority (like the SEC) wants to investigate, all the transactions are recorded.

The difficulty in this case isn't proving criminal activity it's identifying the criminal.

 

[JoeMorgue]

Short selling gets a stigma because they make money when other people are loosing money, so it's easy to believe "they are the ones who took my money" but this isn't really the case. Short sellers keep the losses from being even larger.

"We've created system that let's us everything short of make money out of nothing" isn't much better.

And while the economy isn't a zero sum game on a purely mathematical level, I'm skeptical that making the amount of money hedge fund managers make appear out thin air actually comes into existences without some ledgers being balanced in the opposite direction somewhere. Not in anything resembling a perfect 1:1 ratio, but you going to have to try hard to convince me that nobody nowhere is holding the short end of some stick because of shorting stocks in most day to day transactions.

And again where does that leave them to complain about what Reddit is doing? Reddit is taking "their" money anymore then they are taking the stocks money by this logic. You can't get mad when your play gets played.

 

[Dr. Keith]

All they need to do is prove that they traded with the intent of changing the market price in order to get others to buy/sell the stock, which is of course exactly what's happening.

I think if you take that broad of an interpretation of that section you would rope in a lot of short sellers, too. Not my field, but my impression from a cursory reading.

 

[lomiller]

Yes. But tying the transaction to a reddit user account may prove rather difficult. You can sign up for a reddit account with an anonymous email, and a VPN.

I'd bet Apple and Google could identify them easily. Whether they would cooperate is another matter, but that only protects Americans.

 

[BobTheCoward]

It doesn't matter. Both are illegal.

It is not illegal for me to tell you to buy stock.

 

[JoeMorgue]

I think if you take that broad of an interpretation of that section you would rope in a lot of short sellers, too. Not my field, but my impression from a cursory reading.

This.

We're going to spend the next few weeks watching a lot of people jump through a lot of hoops trying to make "It's unfair that Reddit manipulated Wall Street's manipulation of stocks" not sound insanely stupid.

 

[lobosrul5]

"We've created system that let's us everything short of make money out of nothing" isn't much better.

And while the economy isn't a zero sum game on a purely mathematical level, I'm skeptical that making the amount of money hedge fund managers make appear out thin air actually comes into existences without some ledgers being balanced in the opposite direction somewhere. Not in anything resembling a perfect 1:1 ratio, but you going to have to try hard to convince me that nobody nowhere is holding the short end of some stick because of shorting stocks in most day to day transactions.

And again where does that leave them to complain about what Reddit is doing? Reddit is taking "their" money anymore then they are taking the stocks money by this logic. You can't get mad when your play gets played.

Umm, someone is holding the short end of the stick. To make a profit from shorting, either through borrowing shares and buying them back later, or buying puts, or selling calls, someone else has to lose a dollar. It is precisely zero sum. In fact its potentially even much worse than that. It can destroy wealth. GMS goes under, they can't pay anyone that lent them credit. The stores are either rented or mortgaged, thats money someone else is going to lose out on (many of which are back by bonds held by pensions etc because its generally a safe investment). Think they're gonna find another tenant in the present circumstance?

 

[Cavemonster]

Wall Street: I know we agreed to play by these terrible rules and I was doing really well with them but now regular folks are beating me this way so we should change the rules.

Did anyone else hear that in Lindsey Graham's voice?

 

[Leftus]

Somebody is going to be left holding the bag, so why not you!

 

[Modified]

Short selling doesn't make the bankruptcy come any faster. It normally drives down the price closer to it's real value. People that own the stock don't like this because they want to sell it before the price collapses.

For Gamestop probably, but it is not always the case. High-risk-high-reward companies that need to raise money, such as a single-shot drug company that needs just a bit more cash to run a trial, can be ruined by shorting.

 

[Cavemonster]

All they need to do is prove that they traded with the intent of changing the market price in order to get others to buy/sell the stock, which is of course exactly what's happening.

IANAL, but the intent of that statute that's relevant seems to hang on that last line.

inducing the purchase or sale of such security by others.

The action of buying a stock to increase its value would need to be done with the aim to get someone to buy it.

The law is clearly intended to prevent misrepresentation, buy a bunch of stock so people will think it's more valuable than it is when they see it going up, or sell a bunch to artificially depress the price and then buy it up again when dumb people sell.

The relevant chain of intent doesn't seem to hold in this case. Their ultimate aim isn't to get people to buy or sell based on the inflated price they're creating.

Again, I'm not a lawyer. And while I suspect the people who created our current trading laws would frown on this action, it doesn't look like it meets the spirit or letter of that law.

 

[JoeMorgue]

Every decade or so we have to pull the country back from financial ruin because a small handful of ultra-rich Wall Street insiders almost pull the whole house of cards down by bending the rules that they largely made up for themselves just a little too hard buying and selling hypothetical money that maybe might exist one day.

But let one subreddit of trolls destroy one hedge fund using equally moral and legal tactics and Wall Street turns into the Emperor in Episode 3 "This attack on my life has left me scarred..."

 

[Cavemonster]

For individual investors. You can bet your ass that as long as NASDAQ allows GME to be traded, the big firms will have no trouble doing so. I have no desire to see Internet trolls win at anything, but this is clearly a class war and the upper class is deploying their nukes.

Are they trolls in this context though? I can see why this action sort of FEELS like trolling, but i don't think it really fits the definition.

 

[lobosrul5]

Short selling doesn't make the bankruptcy come any faster. It normally drives down the price closer to it's real value. People that own the stock don't like this because they want to sell it before the price collapses.

Think about that for a min. People own stock they know is worthless in the long run and want to sell it to someone else to take the loss. How ethical is that? How would you feel about a used car salesman that has a car with serious drive train problems that will be on the scrapheap soon and tries to hide the problems so they can sell it at full price.

Short selling gets a stigma because they make money when other people are loosing money, so it's easy to believe "they are the ones who took my money" but this isn't really the case. Short sellers keep the losses from being even larger.

When short sellers start to abandon the markets, as they are currently, it's a good indicator the market is entering a bubble. In fact they pay a role in preventing such bubbles in the first place, so the fact they exit the market causes the bubble to accelerate. When the bubble collapses many people will lose a lot of money, they will be economic chaos and probabaly a recession.

Driving share prices down certainly effects the viability of a corporation, one thats in trouble anyways. The corp itself will almost always own some shares of itself ("Treasury Shares"), they can sell those if they need to raise capital. The less those shares are worth the less money they will be able to raise. If Gamestop actually has any, or they've sold them off already through desperation, I don't know.

 

[lomiller]

I think if you take that broad of an interpretation of that section you would rope in a lot of short sellers, too. Not my field, but my impression from a cursory reading.

Short sellers are anticipating that the price will drop regardless of the impact of their transactions. For them to be guilty of market manipulation you'd they would need to be trying to profit by creating a short term price drop though their selling then closing their position before the price goes back up. That doesn't fit with what's going on here.


If\when GME files for bankruptcy and is liquidated shareholders will get a few pennies per share and that's it. Anyone who paid more than that (aka the would be raiders) will lose money and the people who sold them (aka the hedge funds) will receive that money.

The play for the would be raiders is that they are trying to use liquidity requirements to force the hedge funds to be the ones to sell at very high prices. In that case the raiders who times their exit correctly would make a profit at the expense of the hedge funds and any raiders who don't get out on time.

IMO no matter which way it goes, some or most of these people will end up loosing money even though they have a big "on paper" gain right now. Buying into a bubble under the assumption someone else will pay more later usually isn't a winning strategy.

 

[BobTheCoward]

Umm, someone is holding the short end of the stick. To make a profit from shorting, either through borrowing shares and buying them back later, or buying puts, or selling calls, someone else has to lose a dollar. It is precisely zero sum. In fact its potentially even much worse than that. It can destroy wealth. GMS goes under, they can't pay anyone that lent them credit. The stores are either rented or mortgaged, thats money someone else is going to lose out on (many of which are back by bonds held by pensions etc because its generally a safe investment). Think they're gonna find another tenant in the present circumstance?

AFAIK...

There are brokers for stock lending. The stock owner gets whatever benefit they can by aggregating their stock with the broker. The broker can fulfill their owner request to sell their stock even if they loaned out that person's exact stock (by using someone else's). They collect a fee for lending. Then the short sellers gets their profit from the later sell.

That doesn't appear to be zero sum.