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Hedge fund Melvin sustains 53% loss after Reddit onslaught

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Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#91

Post by robbomacrae »

kyrieeschaton wrote: post #29

How much evidence is there that the "reddit onslaught" actually moved the price, as opposed to them being the stalking horse for more sophisticated actors with more capital exercising a vanilla short squeeze strategy?

So many conspiracy theories on both sides these days. Don't forget Ocram's razor. I don't think there are many sophisticated actors here at all. I'm speaking as one who did DD on GME back in September and throw some money in (thought it was a great opportunity mainly because of Cohen + the upcoming console super cycle with a tiny chance of squeeze thrown in) It was a smart discovery by WSB and got a bit more than average attention but then it kept growing.. every week more DD's posted and more attention. Now the entire sub is so dedicated to GME its actually annoying.

I think it really is the simple dumb story of a really bad bet by a hedge fund getting called out online and a with more and more jumping on the wagon and with the hedge fund making more and more dumb mistakes. And everyone is underestimating the redditors who, behind the emojis and crap talk, are actually pretty smart. Collectively they can, and did, cause this.. no need to invent other actors to explain it.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#92

Post by mmahemoff »

nickysielicki wrote: post #32
Judgmentality wrote: post #11

Earlier quoted context omitted.

The general assumption on WSB is that Melvin Capital is lying and that they haven't closed their positions. I haven't seen any evidence to suggest they've closed it, and have seen circumstantial evidence suggesting they have not. You don't spend money on ads saying "we no longer have a financial stake in this stock" unless you, you know, have a financial stake in this stock. Considering this is a hedge fund, I just a…

The way that WSB has latched onto Melvin as their enemy is to their detriment. It was never about killing Melvin capital, or at least, it shouldn't have been. It ought to have been about the ridiculous short interest on the stock, regardless of who was funding it. Whether or not Melvin specifically has covered their shorts is irrelevant to how the short interest as a percentage of float has changed in the past week.…

They latched onto Citron first. They're focusing on punishing the "enemy" instead of an abstract trade idea. Motivates holding longer instead of jumping ship to cash out.

At this point though, many original buyers have probably sold some/all and most current holders are in it to make a quick buck, not to stick it to the suits. They'll be happy to jump off with a 2x or 3x return if they think the house of cards is about to collapse. Hedge funds sell first and retail traders left holding the bags, complaining the system's all rigged when they should never have entered in the first place. We don't know the exact timing, but we know it will be bloody at some point.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#93

Post by throwaway2245 »

PurpleFoxy wrote: post #26
viraptor wrote: post #19

Earlier quoted context omitted.

Does the Reddit part matter? It seems to be meta humour around completely risky but reasonable behaviour. You can explain pretty much everything about it in standard market terms. Mentioning the memes and crude humour is just getting into drama. (And completely optional)

It is somewhat important to describe how these people are not acting rationally or individually and how these internet groups can group together to have very powerful and unusual effects.

"Rational", in the strict sense, is really only a useful concept if you are wealthy.

If I have a spare $50, then deciding how to optimally invest it to end up with $51 is not worth the thought or effort put into that.

I'm gonna spend my $50 on entertainment or chicken tenders - here, I have a chance of getting both. It's rational.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#94

Post by dorkwood »

nickysielicki wrote: post #32
Judgmentality wrote: post #11

Earlier quoted context omitted.

The general assumption on WSB is that Melvin Capital is lying and that they haven't closed their positions. I haven't seen any evidence to suggest they've closed it, and have seen circumstantial evidence suggesting they have not. You don't spend money on ads saying "we no longer have a financial stake in this stock" unless you, you know, have a financial stake in this stock. Considering this is a hedge fund, I just a…

The way that WSB has latched onto Melvin as their enemy is to their detriment. It was never about killing Melvin capital, or at least, it shouldn't have been. It ought to have been about the ridiculous short interest on the stock, regardless of who was funding it. Whether or not Melvin specifically has covered their shorts is irrelevant to how the short interest as a percentage of float has changed in the past week.…

The driving force behind the movement is a David and Goliath story. Take away Goliath, or turn the enemy into some abstract concept, and you weaken the story. I'm not sure it would have worked as well.

Organized pump and dumps aren't anything new, but this is the first I've seen that used a story with mass appeal to energize its base.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#95

Post by Judgmentality »

londons_explore wrote: post #54
kyrieeschaton wrote: post #29

How much evidence is there that the "reddit onslaught" actually moved the price, as opposed to them being the stalking horse for more sophisticated actors with more capital exercising a vanilla short squeeze strategy?

My experience of reddit is you can get a "wildly successful" meme or post, yet rarely that translates into more than a few thousand dollars of cash being spent on anything. All the "wildly successful" kickstarters and stuff seem to have commercial backers lined up to make the social media buzz effect appear bigger than it is. I suspect the same happened here.

> All the "wildly successful" kickstarters and stuff seem to have commercial backers lined up to make the social media buzz effect appear bigger than it is.

This is interesting (and not at all surprising). Do you have a link to more information or is this just something you've noticed?

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#96

Post by tedunangst »

briefcomment wrote: post #80
smabie wrote: post #51

Earlier quoted context omitted.

Citadel is not front running trades. This isn't how PFOF works. People say this over and over again, but it just shows that they have little to no understanding of how a market maker operates. Which is fine, everyone is uninformed about some things. Except if you know nothing about something, you shouldn't post naive statements that you claim as factual, when they are in fact not.

You’re right that a lot of people say this. And not just random people, but people with large audiences, and people who presumably have some expertise. What is Robinhood’s relationship with Citadel then?

Not sure what the founder of barstool sports actual experience is in this area. Or whoever else. Also, it's very easy to describe order flow in a disingenuous way (citadel sees the order before the market) that's technically true and will make people think it's front running.

Did the experts say front running? Or did they say paid for orders and somebody else said front running?

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#97

Post by notahacker »

drcross wrote: post #59
MichaelApproved wrote: post #17

Earlier quoted context omitted.

> If they really had exited, why would they bother telling anyone? They have their own customers and reputation to maintain. They’re trying to let their customers know that the damage is done and they’re out. They’re trying to stop their customers from abandoning them.

...or they lied. You're picking one answer and I'm picking a different one, either are just as likely.

One of them involves them deciding they'd rather be prosecuted by the SEC for lying than use the bailout for what they said they used it for, and the other involves some people on Reddit being wrong. I don't think "either are just as likely"

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#98

Post by rantwasp »

mathattack wrote: post #73
motohagiography wrote: post #58

%53, so far. The problem with the short interest being %140 is that the notional value of shares to cover that extra %40 is in fact, infinite. It's literally everything those funds can sell, borrow, and get bailed out to cover their position. My prediction last week was this has system wide implications, and I'm thinking 1. the Fed will intervene, leverage Robinhood's EULA, and buy out everyone's shares at a price th…

This isn’t that big a deal. LTCM was levered up 100 to 1 when it got bailed out on its 3 billion notional. Bear and Lehman were levered up 30 to 1 on their billions of assets. I don’t see that kind of leverage or counterparts risk here. A hedge fund or two blows up. Maybe they take a small investment bank with them. The system can survive that shock.

you believe markets are rational. they are not. if the hedge funds that messed up unload shares of other companies they own to eventually cover, this could easily escalate via a positive feedback loop collapsing the whole market (the fact that we’re in a market that ignores fundamentals is also not helping).

so the fed just just force the hedge funds to cover in a controller way (ie you’re no longer allowed to short, you have 3 months to cover or you’re gone)

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#99

Post by SpicyLemonZest »

vga805 wrote: post #36
nickysielicki wrote: post #20

Earlier quoted context omitted.

The shorts, from Melvin and others, have mostly been covered, leaving a lot of people holding bags. https://twitter.com/ihors3/status/1356018482471718916 https://s3partners.com/Exclusive.html?utm_source=twitter&utm... This is not some hedgefund guy trying to spread FUD, he's been pretty consistent in his reporting on this over the past week. ie: this post on Thursday https://www.zerohedge.com/markets/we-have-some-bad…

In one of the comments Ihor said the algorithm will be running overnight to get a better idea of the actual number... Is it actually plausible that an algorithm running on presumably one stock needs to run for over a day? I believe S3, they've been reliable so far. But with this much money at stake, it wouldn't surprise me if they've been bought out to spread misinformation.

I can't personally evaluate his credibility, but his claim seems to be that "the algorithm" will be running overnight because new data from Friday's trades is still coming in.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#100

Post by [deleted] »

robbomacrae wrote: post #91
kyrieeschaton wrote: post #29

How much evidence is there that the "reddit onslaught" actually moved the price, as opposed to them being the stalking horse for more sophisticated actors with more capital exercising a vanilla short squeeze strategy?

So many conspiracy theories on both sides these days. Don't forget Ocram's razor. I don't think there are many sophisticated actors here at all. I'm speaking as one who did DD on GME back in September and throw some money in (thought it was a great opportunity mainly because of Cohen + the upcoming console super cycle with a tiny chance of squeeze thrown in) It was a smart discovery by WSB and got a bit more than ave…

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