The Gamestop Stock Market Boogaloo
Posted: Wed Jan 27, 2021 5:22 amI'm sorry but there's no other way to start this thread other than
hahaahhahahahahaha.
Okey, with that out of the way, let's cover the basics.
DISCLAIMER:
This is my best understanding of the situation.
Short selling is when you think a companies stock price is going to go down. So you borrow some stock, sell it, and then buy it back later when the price is lower, then give the stock back to the person you borrowed it from.
(As a non-stock example. Let's say I borrow your car. It's worth 10,000 dollars. I sell it to someone. I now have 10,000 dollars, but I owe you a car. I then buy the same car when the price drops to 5,000 dollars, and give it back to you along with 500 dollars for you lending me your car, and walk away with 4,500 dollars.).
It is not like a normal investment. If I invest 100, I can only ever lose 100 if the stock drops to zero. However, with short selling the risks on this are in fact theoretically infinite. If I borrow your car and sell it for 10k, thinking i can buy it again later, and then something happens like it turns out that brand of car makes you immortal and gives you magic powers, and the price rises to 2 billion dollars, i am fucked. I have 10,000 dollars and a debt of 1,999,999,99000.
I *have* to return your car to you, and if I can't, you can seize my assets equivalent to the value of the car *as it is currently valued*.
So.
Enter gamestop.
Gamestop is a brick and mortar games company. It hasn't been doing well.
Hedge fund managers and institutional investors swoop in to short the shares. They short more than 100% of the shares available. (Because borrowing shares is involved, a single share can be shorted multiple times.).
This is discovered by reddit.
Reddit users then decide to buy up as much gamestop stock as they can and refuse to sell it until the wall street investment firms go bankrupt.
Cue the panic.
The stock rose from 3 dollars to 140 dollars, and is still rising, because the short sellers *HAVE* to return the shares to the people they borrowed from, there are only so many shares, and redditors are trolling the shit out of them by refusing to sell, and only doing so if the stock price climbs.
So far, they have lost 5 billion dollars. Almost 2 billion dollars in a single day. Mostly going to ordinary fuckwits who decided to spend a hundred bucks on buying gamestop shares at 3 dollars a piece, knowing that the hedge fund managers *would have no choice but to buy from them at some point no matter what price they demanded, because they shorted over 100% of the stock*.
It's the equivalent of finding out there are 100 toyotas available and the short-seller needs to return 150 of them. (Buy returning them, then buying them from the person they borrowed from, and then returning them to another person they borrowed from).
So you and your friends swoop in and buy 80 of them and... that's all it take to break wall street. Just doing that and not blinking when the stock price collapsed to almost 0, because you *know* it has to climb back up. When the short-seller calls and goes "Gee i feel real bad about selling you that toyota for 10,000 bucks now the price has gone to 5,000. How about I offer you 5,500 to take it back of you?" and you say "No thanks." and get all your friends to do it to and watch as they squirm and say "How about 8000?"
"No thanks."
"10000!"
"No, thankyou."
"...15,000."
"Okay buddy sure. You can have one toyota for 15,000 dollars."
The the next calls in a panic "I need to buy your toyota at 15,000. That's their value right?"
"nah."
And so on, rinse repeat.
And wouldn't you know? Suddenly the financial media is calling for regulation on the stock market. They don't like this. This is against the fundamentals of capitalism, this is insane, this is ridiculous, this is unfair, there needs to be legislation to stop people doing this to wall street.
So far there has been one bailout, and one wall street fund going into bankruptcy having been looted by users of the "Robinhood" app that helped organize this operation, its money distributed to people who bought gamestop shares, carcass picked apart. As one person put it "You're going to trickle down whether you like it or not.".
So, NSG, what should be done about this?
Is this a sign of the free market being self-correcting against people like wall street provided people know how to play them at their own game?
Should this be regulated to protect wall street investments?
How loud did you laugh about this?
hahaahhahahahahaha.
Okey, with that out of the way, let's cover the basics.
DISCLAIMER:
This is my best understanding of the situation.
Short selling is when you think a companies stock price is going to go down. So you borrow some stock, sell it, and then buy it back later when the price is lower, then give the stock back to the person you borrowed it from.
(As a non-stock example. Let's say I borrow your car. It's worth 10,000 dollars. I sell it to someone. I now have 10,000 dollars, but I owe you a car. I then buy the same car when the price drops to 5,000 dollars, and give it back to you along with 500 dollars for you lending me your car, and walk away with 4,500 dollars.).
It is not like a normal investment. If I invest 100, I can only ever lose 100 if the stock drops to zero. However, with short selling the risks on this are in fact theoretically infinite. If I borrow your car and sell it for 10k, thinking i can buy it again later, and then something happens like it turns out that brand of car makes you immortal and gives you magic powers, and the price rises to 2 billion dollars, i am fucked. I have 10,000 dollars and a debt of 1,999,999,99000.
I *have* to return your car to you, and if I can't, you can seize my assets equivalent to the value of the car *as it is currently valued*.
So.
Enter gamestop.
Gamestop is a brick and mortar games company. It hasn't been doing well.
Hedge fund managers and institutional investors swoop in to short the shares. They short more than 100% of the shares available. (Because borrowing shares is involved, a single share can be shorted multiple times.).
This is discovered by reddit.
Reddit users then decide to buy up as much gamestop stock as they can and refuse to sell it until the wall street investment firms go bankrupt.
Cue the panic.
The stock rose from 3 dollars to 140 dollars, and is still rising, because the short sellers *HAVE* to return the shares to the people they borrowed from, there are only so many shares, and redditors are trolling the shit out of them by refusing to sell, and only doing so if the stock price climbs.
So far, they have lost 5 billion dollars. Almost 2 billion dollars in a single day. Mostly going to ordinary fuckwits who decided to spend a hundred bucks on buying gamestop shares at 3 dollars a piece, knowing that the hedge fund managers *would have no choice but to buy from them at some point no matter what price they demanded, because they shorted over 100% of the stock*.
It's the equivalent of finding out there are 100 toyotas available and the short-seller needs to return 150 of them. (Buy returning them, then buying them from the person they borrowed from, and then returning them to another person they borrowed from).
So you and your friends swoop in and buy 80 of them and... that's all it take to break wall street. Just doing that and not blinking when the stock price collapsed to almost 0, because you *know* it has to climb back up. When the short-seller calls and goes "Gee i feel real bad about selling you that toyota for 10,000 bucks now the price has gone to 5,000. How about I offer you 5,500 to take it back of you?" and you say "No thanks." and get all your friends to do it to and watch as they squirm and say "How about 8000?"
"No thanks."
"10000!"
"No, thankyou."
"...15,000."
"Okay buddy sure. You can have one toyota for 15,000 dollars."
The the next calls in a panic "I need to buy your toyota at 15,000. That's their value right?"
"nah."
And so on, rinse repeat.
And wouldn't you know? Suddenly the financial media is calling for regulation on the stock market. They don't like this. This is against the fundamentals of capitalism, this is insane, this is ridiculous, this is unfair, there needs to be legislation to stop people doing this to wall street.
So far there has been one bailout, and one wall street fund going into bankruptcy having been looted by users of the "Robinhood" app that helped organize this operation, its money distributed to people who bought gamestop shares, carcass picked apart. As one person put it "You're going to trickle down whether you like it or not.".
So, NSG, what should be done about this?
Is this a sign of the free market being self-correcting against people like wall street provided people know how to play them at their own game?
Should this be regulated to protect wall street investments?
How loud did you laugh about this?
