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GameStop Is Rage Against the Financial Machine

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Re: GameStop Is Rage Against the Financial Machine

#941

Post by silexia »

teekert wrote: post #474
silexia wrote: post #366

Earlier quoted context omitted.

I sold a GME call option with a strike price of $320 and expiration in July today for $200. A pump and dump by novices is easy money if you know how to play it. Everyone knows this is going to crash, the question is when?

Why do you call it a pump and dump by novices when it seems to be the opposite that was being done by shorters, they just got caught and now they have to pay, seems like the novices just beat them at their own game. [0] [0, as posted by colllectorof] https://lbry.tv/@rossmanngroup:a/why-mainstream-media-s-slan...

Most people on WSB understand the game here is a short squeeze. They all expect the stock to return to $5-50 when the squeeze is done. That means that the ones who currently own GME or it's call options plan to sell those in short order when whatever target price is achieved.

Hence my calling it a pump and dump... They are pumping the stock up with highly positive videos like the one you posted and comments on WSB to get the price higher faster so they can sell and make a max profit. But for this to happen, they are going to need a buyer who buys at the very top.

Who is that buyer going to be? No savvy investor will go near buying a pump and dump with a ten foot pole. Sadly, it will be the newbies on WSB and the newbies watching this Rossmann video who buy at the top and lose everything as it plummets down.

You might say, "Well I am not going to be that newbie"... But only a very few will sell at the top... Maybe 1-5%. A few more will make solid returns. But all that profit for those guys on top will come from gullible retail investors. That is why MSM is calling BS.

Re: GameStop Is Rage Against the Financial Machine

#942

Post by pbalau »

Thorrez wrote: post #868
anonymouse008 wrote: post #782

Earlier quoted context omitted.

I'm really confused because wouldn't that require a filing with the SEC to authorize shares? Wouldn't that number become part of the float? I looked into "fails" data, and I'm a bit lost [0]. Is Alice's IOU sellable as a security with voting rights? Who gets to vote on those 100 shares? There are now 200 votes? That's very strange. I've heard of synthetic longs before but in options [1] [0] https://www.sec.gov/data/f…

I can't answer most of your questions, but I think I can answer the voting part. There are 100 shares, Alice owns all of them, but loans them all to Bob so Bob can short them. Bob sells all of them to Charlie. So Alice owns 100 shares and Charlie owns 100 shares even though only 100 real shares exist. (Bob owns -100 shares.) But Alice can't use her shares for voting because she loaned them out, only Charlie can vote.

That's not correct. Alice does not own anymore the shares, only Charlie does.

There are 2 steps involved:

1) shares borrowing

2) shares selling

Shares borrowing: Bob will borrow 100 shares from Alice. Bob will have to give Alice a collateral, valued at 100% value of the shares + a percentage. Bob also has to pay a borrowing fee to Alice, daily.

At this point, Bob owns the shares, not Alice. Alice does not receive dividends directly from the company that issued the shares and Alice does not have any voting rights.

If those shares produce dividends, then Bob has to pay those dividends to Alice. If Alice invests the collateral and that produces profit, Alice needs to pay some of it to Bob.

When Bob thinks all is said and done, he has to return 100 shares (not particularly the same shares, but the same type and amount). At that point, Alice will return the collateral. Alice regains the voting rights and will get dividends.

Shares selling: Bob sells 100 shares to Chuck. Chuck owns 100 shares (the ones previously owned by Alice), has the voting rights associated with the shares and will receive dividends (if the shares generate that).

There are no extra shares generated by this process.

Alice is not a person, but a financial institution, most likely a bank.

https://www.investopedia.com/terms/s/securitieslending.asp

Re: GameStop Is Rage Against the Financial Machine

#943

Post by chillacy »

EGreg wrote: post #725
bgutierrez wrote: post #713

Earlier quoted context omitted.

Yeah, I think the anger is a device for keeping each other from selling, but has nothing to do with how this situation arose.

HODLers also use emotion and ideology to keep from selling. It’s decentralized motivation to coordinate!! :) Someone would do well to inspire a cult following and a viral one at that... then it will attract people who just believe in the To the Moon rocket emojis

This is some of the oldest stuff in the book in terms of human psychology: how to create group beliefs, how to punish defectors, etc. I think it might work surprisingly well, given the rise of populist movements in the past few years.

Re: GameStop Is Rage Against the Financial Machine

#944

Post by Aunche »

AdmiralAsshat wrote: post #20

> These points doubtless make me appear to be a complacent shill for the financial industry, talking down to the rubes. For the record, I’m still angry about the way workers were ripped off in Britain more than three decades ago, and about the way the little guy ended up bearing the brunt for the financial implosions of 2000 and 2008. But it looks horribly to me as though the same thing is going to happen again — and…

The people hurting are the ones who get addicted to gambling with stocks and options. One person becoming a millionaire doesn't make up for another losing their life savings.

Re: GameStop Is Rage Against the Financial Machine

#945

Post by prewett »

Domenic_S wrote: post #890
pivoter wrote: post #640

Earlier quoted context omitted.

you don't seem to understand what's going on. gamestop itself is just stuck in the middle of a battle created because of financial investment tools. It doesn't really matter which company it is, it just matters that the company is shorted at >100% of total issued shares. if the gamestop is still shorted at 130-150% of total issued shares (finra report coming soon) that means the shorters are going to be paying intere…

I understand very much what’s going on, I wasn’t asking why it isn’t worth today’s price, I was asking why it’s worth $5-$40. GameStop did 6 billion in revenue 2020. At $5 per share that’s a ~348mm valuation.

Revenue != profit. That $6.5 billion in revenue cost them just over $6.5 billion, so net they lost a little bit of money in 2020. The three years prior, net profit was between 0.3 cents/share and 0.5 cents/share. Additionally, revenue decreased from about $8.5 billion last year. So if the past four years are representative of future prospects, the value of GME's business is $0. But the assets - liabilities (book value) is about $5/sh.

Re: GameStop Is Rage Against the Financial Machine

#946

Post by somedude895 »

aaron-santos wrote: post #695
AlexCoventry wrote: post #678

Earlier quoted context omitted.

I agree. The anger seems like an ancillary phenomenon. People seem to be buying because they think it's a sure thing that the asset price will increase. Maybe anger at shorters helps justify exploiting their error, but it's not the primary motive.

Anger/vengence seems like a primary motivator. Let me put it this way: how much money do you think these folks would pay to see a hedge fund manager crap his pants?

Not much. Everyone is mainly hoping for big profits and if they manage to show they're powerful enough to bring a hedge fund to its knees in the process then that's simply an added benefit. The anger at the big guy is just an artificial banner behind which to rally the troops. The objective is profit and the motivation is greed.

I have no skin in the game so I don't care who comes out on top, but it's delusional to think there's some noble cause behind all this on either side of the game.

Re: GameStop Is Rage Against the Financial Machine

#947

Post by coliveira »

dcolkitt wrote: post #903
coliveira wrote: post #887

Earlier quoted context omitted.

You're incorrect, nobody can go around shorting stocks like crazy. First one need to borrow the stock, which may be difficult for some stocks. This creates a concrete imbalance between long and short holders and a limit for how much can be sold short. But that's not the whole problem, every short stock needs to be covered by some margin. If the stock goes up too much, the short seller needs to buy it back no matter w…

> First one need to borrow the stock, which may be difficult for some stocks. In the US, stock loan markets are extremely deep and liquid. Finding borrow is rarely a problem. Borrow fees may be relatively high, about 0.1% per day right now for GME. But considering that short sellers are targeting an 80%+ profit within a few weeks, that's not a real deterrent Virtually 100% of shares held at retail brokers are availab…

> could short 30% of the float in GME, and it'd still only be 2% of their portfolio

That would be true if it wasn't for leverage. When using portfolio margining, the leverage is huge. So a relatively small change in the stock will result in large losses. Now, you're right that this is not going to break a fund like Citadel, but not all hedge funds are that huge.

Re: GameStop Is Rage Against the Financial Machine

#948

Post by kahrl »

xur17 wrote: post #352
kahrl wrote: post #313

Earlier quoted context omitted.

Short sellers illegally borrowed more stock that actually existed. They are the criminals here. Not the people discovering this and taking the criminals for everything they have.

Is it actually illegal to do this (not should it be, is it)?

Yes. It’s called naked short selling. It’s been illegal since 2008. https://en.m.wikipedia.org/wiki/Naked_short_selling

Re: GameStop Is Rage Against the Financial Machine

#950

Post by vga805 »

mckirk wrote: post #670

Some interesting observations: In the last few hours, the WSB Discord was banned for 'hate speech' and the WSB subreddit had to close for a while because of a massive influx of bots. To me, that does not really seem like an indication of the short squeeze being over and the big players being safe out of the game. And yet, the prevalent opinion here seems to be that retail investors can only lose from here on out... w…

This. This is what's been boggling my mind.
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