Current Events > I can't even ignore it, what's going on with Musk, Gamestop & wallsreetbets?

(+) Yeah! (+)

It's everywhere.
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people think they 'got' the investment houses who are paying <3% interest to hold shorts until irrational exuberance ends and panic selling begins

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This imgur thread explains it better than I could;

https://imgur.com/gallery/DCCpuZA
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devilminion posted...

This imgur thread explains it better than I could;

this thread is full of shit

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Musk has nothing to do with it other than being a cringey asshole.

As for the rest, here's a good explanation from r/outoftheloop.

Short selling involves borrowing a stock from someone who owns it with the promise to return it at a later date, and pay a small fee based on the value of the stock. You then sell the stock, wait for the price to drop and buy it back at a cheaper price. You then return the stock to the original owner and pocket the difference.

This allows people to make money off of a drop in the price of a stock. Unlike with regular stock trading, however, the potential losses of you are wrong are not limited. If you buy a $10 share in a company and the company goes bankrupt, you lose $10. If you short a company with a $10 share price, and that price jumps to $100 per share, you just lost $90.

Since the start of the pandemic, GameStop has clearly been struggling in a big way. Such a big way, that a lot of people, including major hedge funds, decided to short GameStop. A lot.

Lets say I own a share of GameStop stock and you want to short it. I lend you my share, and you sell it. Now someone else wants to short the stock as well, so they borrow the share from the person you sold it to and then they sell it. And so on. If this happens enough times, you can have more people who owe back a share to the original owner than there are actual shares of the stock.

This happened to GameStop which had 140% of its share sold short. This presents a problem for short sellers if the price of the stock starts going up instead of down, because there arent enough shares to go around if they decide they all need to cut their losses and buy back the shares they owe at once.

Some smaller investors, including those at r/wallstreetbets, noticed this happening to GameStops stock and decided to take advantage. They bought up a bunch of shares themselves, driving the price up and further limiting the availability of shares. This caused some short sellers to pull out, which drove the price up further, which caused more short sellers to pull out, and so on.

Meanwhile, the attention brought to this story and the quickly rising share price caused more people to buy the stock in the hope of taking advantage of the meteoric rise in price to make money themselves.

Back in the summer, you could buy a share for $4 apiece. Yesterday, those same shares were $147 each. Today theyre $345. The big hedge funds that were selling the stock short are currently literally billions in the hole while the smaller investors are making money hand over fist.

That all said, GameStop is still a struggling company underneath it all. It is nowhere near as valuable as its current share price, which means that, eventually, the bubble is going to burst and the price is going to come crashing back down. Anyone who buys in at the top expecting it to keep shooting up is going to lose a ton of money. Anyone still shorting it at that time is going to make a ton of money, and anyone who bought it early and sells before it pops is going to make a ton of money.

Its not entirely clear whether the hedge funds are going to wind up actually losing billions in the end or if they can recoup some of that when the bubble bursts (they may or may not come out ok), but there are definitely going to be a bunch of people currently riding the hype train who lose whatever they invest at this point.

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Sackgurl posted...

people think they 'got' the investment houses who are paying <3% interest to hold shorts until irrational exuberance ends and panic selling begins

Melvin has already lost billions. They are fucked and they know it. They are already crying for bail outs.

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nice, i remember people here going crazy about gamestop stock prices when this was going down, probably w/o realizing what was happening behind the scenes lmao.

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Tyranthraxus posted...

Melvin has already lost billions. They are f***ed and they know it. They are already crying for bail outs.

melvin capital closed its short position on tuesday

its total managed assets are worth 12b which is more than GME's market cap was on tuesday, so maybe don't get ahead of yourself

any of the firms who are relying on selling calls are definitely screwed, but anyone who sells calls and isn't hardwired to the NYSE (and i mean that literally) deserves to get screwed

the people pushing this have no concept of how leveraged the average equity is.

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@Sackgurl posted...

melvin capital closed its short position on tuesday

its total managed assets are worth 12b which is more than GME's market cap was on tuesday, so maybe don't get ahead of yourself

any of the firms who are relying on selling calls are definitely screwed, but anyone who sells calls and isn't hardwired to the NYSE (and i mean that literally) deserves to get screwed

the people pushing this have no concept of how leveraged the average equity is.

And how exactly did it do that hmmm?

Fyi, the news reports that a Melvin spokesperson SAYS they closed it out.

And they have soooo much incentive to lie.