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Robinhood Raises Another $2.4B from shareholders

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Re: Robinhood Raises Another $2.4B from shareholders

#71

Post by ZephyrBlu »

Accujack wrote: post #62
ZephyrBlu wrote: post #51

Earlier quoted context omitted.

To clarify, this is not considered a naked short because in this situation there is a share that is known to exist. Re-borrowing the same share does not make it a naked short.

It has to not only exist, but be obtainable. In any case, the important limit here is that financial firms are not supposed to allow hedge funds or other entities to assume short positions for more stock than exists, because if it becomes necessary to execute the trades to resolve the shorts, that extra 40% will fail to deliver, because those shares don't exist. The SEC actually keeps a list of trading companies with…

> It has to not only exist, but be obtainable

"Naked shorting is the illegal practice of short selling shares that have not been affirmatively determined to exist"

- https://www.investopedia.com/terms/n/nakedshorting.asp

> that extra 40% will fail to deliver, because those shares don't exist

This is not true because all shorts don't have to be covered simultaneously.

> The SEC actually keeps a list of trading companies with high rates of failure to deliver as a means of detecting naked shorting

Funnily enough, $GME had very high failure to deliver rates in December [0] but this is not necessarily due to the short interest.

[0] https://www.reddit.com/r/wallstreetbets/comments/l97ykd/the_...

Re: Robinhood Raises Another $2.4B from shareholders

#72

Post by rland »

Accujack wrote: post #27
loceng wrote: post #5

This is a fascinating game to watch. I watched The Big Short yesterday for the first time, as it's trending on Netflix and was suggested, and this moment feels similar to exposing a weakness in the system that needs to be addressed - and hopefully not to strengthen the wrong position; I didn't realize the incredible actors cast for it, obviously they took on the roles as it's an incredibly important story for the gen…

Yes. If you read what the ultimate intent of the /r/wallstreetbets crowd is, they're not just trying to exercise the same right to make money off of the financial system that billionaires have. A year ago, the person that started this detected a situation where GME was a company that didn't have long term prospects, wasn't losing money, but was still shorted to 140% of it's value. It's not supposed to be possible to…

That's the myth, and it's been pretty effectively sold to redditors. The reality is that there are hedge funds who profit on both sides of the trade. There were a few shorts who did lose a lot of money, but that is part of the risk of shorting stock and it's kind of incredible that people think that those hedge funds believed that their trade was risk free.

I think now, the cat is out of the bag, and astroturfing a pump-and-dump on reddit/twitter/discord is going to be a pretty lucrative thing now for some entities, at least until there's some kind of regulatory action against it. Comments like this: "I'm trying to jump in but can you eli5 what a market order is please?" get translated to "Come eat my lunch please! I would like to give away my money."

They want to see the whole unfair system burn, which I totally get, but this is not how you make that happen. Regular people do have a lot of power over our financial system, but when they try to exercise it like this... it's difficult to watch. So many people are going to eat shit on this. They'll be left holding the bag and wondering why everyone else on Wall Street got so rich off their backs.

If you're reading this and you think you might be sticking it to the hedge funds by buying in: there are plenty -- PLENTY -- of hedge funds who are willing to sell you GME at $350 per share.

Re: Robinhood Raises Another $2.4B from shareholders

#73

Post by Accujack »

kcg wrote: post #57
Accujack wrote: post #47

Earlier quoted context omitted.

The practice I'm referring to is "naked shorting" which has been illegal since 2008 in the US.

Except you're completely conflating terms and numbers here. A stock can have over 100% short interest with no naked shorting occurring. >100% short interest DOES NOT imply that there is naked shorting.

It doesn't guarantee that it's occurring, but it's strong indicator that something sketchy is happening.

In this case, the important point is that a hedge fund with a 140% short position is more vulnerable to loss than a hedge fund with a 100% short position.

Re: Robinhood Raises Another $2.4B from shareholders

#74

Post by scruple »

blantonl wrote: post #10
themihai wrote: post #3

The stocks(GME) are still limited/restricted btw

That's correct. Additionally, Robinhood isn't the only one in a bind right now. TD Ameritrade has restricted a lot of options trading on a lot of these stocks, requiring you to call in to sell certain types of derivatives plays which have a level of risk but highly profitable for experienced traders. It's left a VERY sour taste in my mouth to know I have to call into a call center, and wait 90 minutes to speak to som…

My wife has been on hold with IBKR for the last 2 hours trying to get through to get orders placed.

Re: Robinhood Raises Another $2.4B from shareholders

#75

Post by kcg »

Accujack wrote: post #67
SpicyLemonZest wrote: post #43

Earlier quoted context omitted.

I think you need to seriously consider the possibility that the people spreading this narrative are doing so dishonestly in order to pump the stock. Short interest is now far below 100% ( https://www.bloomberg.com/news/articles/2021-02-01/gamestop-... ), yet /r/wallstreetbets is still full of hold memes rather than victory speeches.

Also the possibility that people spreading the narrative that people are dishonestly spreading narratives to pump the stock. My summary above is rough, and it's based on most of the information I've read about the situation. As always, there are voices on both sides for every single fact. Time will tell how this all falls out, but right now there are a lot of finance firms grinding their teeth, which is a victory in…

>Also, apparently Gamestop itself used the gain in stock price to settle some debts by being able to issue more stock to meet demand at the higher price, thus getting a cash infusion.

False -- if you're going to spread information about financial nuances across this thread, you should look it up first. Go read the SEC filings for GME (SEC EDGAR is your friend), there has been no additional issuance since GME took off. Nor would it be realistically possible given the volatility.

Re: Robinhood Raises Another $2.4B from shareholders

#76

Post by frombody »

ping_pong wrote: post #55

I find it very hard to believe hundreds of thousands of new accounts were created since Thursday. Everyone I know trading on RH is now actively in the process of transferring out, once they close up their short term trades like GME.

It was the most downloaded app in the apple store and 2nd most in google play.

Re: Robinhood Raises Another $2.4B from shareholders

#77

Post by swampthing »

maxerickson wrote: post #23
hehehaha wrote: post #16

Imagine you found a number one trading platform and end up having to dilute your stake by a factor of 2 (or more likely) within a week because of a meme stock. I actually feel bad for the founding members at RH.

Who knows how aware they were of it, but this didn't happen just this week or just because of a meme. They built the business to operate in a certain way and then let it grow without ensuring they had the capital reserves to sustain those operations.

"Sustain" is not really an accurate word here. The underlying assumptions behind Robinhood's operations changed suddenly, drastically, and unexpectedly. They were notified at 3am Thursday that they needed to put down a $3B deposit, which they have subsequently needed to raise from investors in a matter of days. So it's really not clear that all of this is because they weren't prepared to sustain their operations.

Re: Robinhood Raises Another $2.4B from shareholders

#78

Post by maxerickson »

swampthing wrote: post #77
maxerickson wrote: post #23

Earlier quoted context omitted.

Who knows how aware they were of it, but this didn't happen just this week or just because of a meme. They built the business to operate in a certain way and then let it grow without ensuring they had the capital reserves to sustain those operations.

"Sustain" is not really an accurate word here. The underlying assumptions behind Robinhood's operations changed suddenly, drastically, and unexpectedly. They were notified at 3am Thursday that they needed to put down a $3B deposit, which they have subsequently needed to raise from investors in a matter of days. So it's really not clear that all of this is because they weren't prepared to sustain their operations.

Getting the underlying assumptions wrong or at least completely out of step with day to day operations is what I am getting at. It didn't happen overnight that they had extended customers more margin than they were able to secure.

Re: Robinhood Raises Another $2.4B from shareholders

#79

Post by swampthing »

vincentmarle wrote: post #20

We are starting to see the limits these apps have, they are just not cut out to be considered a professional broker. It's funny they worry so much about (short-term) liquidity, while their long-term brand & trust & customer base erodes irrecoverably by the minute.

The funny part is people migrating to brokers who are even less prepared than Robinhood, not realizing that the only reason the same thing didn't happen to those brokers is because they didn't have the volume that Robinhood had.

Re: Robinhood Raises Another $2.4B from shareholders

#80

Post by swampthing »

maxerickson wrote: post #78
swampthing wrote: post #77

Earlier quoted context omitted.

"Sustain" is not really an accurate word here. The underlying assumptions behind Robinhood's operations changed suddenly, drastically, and unexpectedly. They were notified at 3am Thursday that they needed to put down a $3B deposit, which they have subsequently needed to raise from investors in a matter of days. So it's really not clear that all of this is because they weren't prepared to sustain their operations.

Getting the underlying assumptions wrong or at least completely out of step with day to day operations is what I am getting at. It didn't happen overnight that they had extended customers more margin than they were able to secure.

As I understand it, the deposit requirements imposed on Robinhood were not because of the margin accounts.
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