Wall Street’s big bets against GameStop’s future were turned on its head when users of a Reddit forum decided to bet on success instead. Now billions of dollars are at stake

Wall Street investors have been betting for years that video game retailer GameStop would fail They said the move to buy online games would ultimately spell fate The pandemic seemed to be accelerating those changes too Wall Street was so sure of GameStop That would make it one of the most heavily antagonistic stocks in the marketplace, however, in recent months, some Reddit users have been buying up stocks, adding to the value of GameStop, and undermining Wall Street’s big stakes at first, these forum traders bought Because they believed the company was better off than Wall Street doubters thought. Then, as GameStop’s value rose, Wall Street’s bad bets cost investors billions of dollars

Now Reddit users want the price to go up even further as they wage an epic battle on Wall Street

At some point, Reddit users from forum r / WallStreetBets got the stock by more than 14Sent up 300% (you read that right) after going through wild swings.They have expanded their strategy to include the struggling film chain AMC and tech company BlackBerry, and in their wake, these online market players have turned Wall Street on its head But not just big investors losing billions of dollars. There are endless memes, app trading disasters, and weird internet jargon (like calling stocks “stonks”)

It’s a crazy story with cameos of Elon Musk, CEO of Tesla, and CNBC financial commentator and former hedge fund manager Jim Cramer There’s even Michael Burry, one of the subjects of the book and movie The Big Short, who happens to be a celebrity The investor in GameStop is

Even Silicon Valley found a way to get right in the middle of this mess It’s wild

Though the move is dubbed “insane” and a “Ponzi scheme,” GameStop stock has become the site of a war between Wall Street and internet retailers. Almost everyone, almost everyone, expects it to fail. The questions are when and who will lose in the end

“We’re seeing a phenomenon I’ve never seen before,” said Jim Cramer, a Wall Street commentator at CNBC and a former hedge fund manager, during a segment when GameStock shares skyrocketed and GameStop could just be the beginning “It’s crazy”

It all started last week when posters in the Reddit stock trading chat community r / WallStreetBets spiked the struggling game retailer’s stocks with much of Wall Street betting against GameStop’s success, investors believed by r / WallStreetBets, they could force a market rally by creating demand that had previously given little

As a result, GameStop stock rose more than 822% per share from $ 17 at the beginning of the year to a high of $ 15918 on Jan 25 The next day it fell by almost half just to get up again. And then Elon Musk tweeted about it to his 43 million followers (using that weird internet vocabulary, of course) and the price went up 40%

Later that week, the stock rose even further to $ 483 per share before halving again. In the midst of the chaos, the stock exchange temporarily stopped trading GameStop stock more than a dozen times on a few days as price moves sharply around large amounts fluctuated

It’s not just GameStop Reddit traders, either, turning their eyes to BlackBerry, trying the same trick against Wall Street’s negative bets so far, they have more than doubled shares from $ 658 per share where they are too The year started, although the price also fluctuated up and down

There are also AMC theaters that saw their business crater when movie releases were pushed back and people stayed home.But Reddit users think Wall Street is too pessimistic in that regard too, which leads them to the hashtag #SaveAMC to spawn on Twitter The stock rose from $ 2.01 per share at the start of the year to $ 1990 on Jan 27 before halved the next day

Some trading companies like Robinhood, TD Ameritrade, and WeBull responded to the volatility by restricting trading in GameStop, AMC, and other fast-moving stocks during the mayhem

Robinhood drew particular anger and led US Representatives to Rashida Tlaib and Alexandria Ocasio-Cortez, and Sen. Ted Cruz to criticize his decision Some people had previously raised concerns about Robinhood, saying it had “gamified” stock trading. Now it is being accused of total market manipulation, including through at least one class action lawsuit that Robinhood said the market rules had effectively forced to introduce these restrictions

There’s Lots to See So here’s what you really need to know about GameStop, AMC, and Wall Street

GameStop is one of the largest video game retailers in the world but is struggling to stay relevant in the age of online sales

In fact, the r / WallStreetBets crowd realized that Wall Street had made a big mistake. The folks known as short sellers who had bet GameStop stock would fall had been too aggressive

The crowd at r / WallStreetBets understood that if they could use their own money to create artificial demand for GameStop stock, they could force Wall Street to recalibrate their bets, which will drive prices up even further And some investors who couldn’t even secure their bets against GameStop would have to pay even more

As of Jan In 27 there were 38 million members of the r / WallStreetBets community, although it’s nearly impossible to determine how many people are involved in the GameStop, AMC, and BlackBerry programs

What we do know is that all of this activity created a “short squeeze” in which the short sellers betting against GameStop are forced to buy more GameStop stock to cover their losses and that still has the price further up, forcing more short sellers to cover their losses, pushing the price up even more.Some of the Reddit fans believe that GameStop stock could reach thousands of dollars because of this mechanism alone

See also: GameStop’s stock spike through slang from Reddit’s r / WallStreetBets community this is what it means:

When people buy a stock normally, they are betting that it will go up or share enough profits to make more money than they invest

Short sellers or “shorts” do the opposite. Shorts trade in borrowed stocks and sell them in the hopes that they can make money if the stock falls in the future

Imagine Ian Corp. vor is a public company and their shares are worth $ 10 A “short” would borrow Ian Corp shares and sell them for $ 10 Your bet is that Ian Corp. The stock will actually fall below that – maybe to $ 4 if it does, they can buy the stock for $ 4 and pocket the other $ 6

If Ian Corp The stock jumps to $ 25, then the lender who made that bet possible can push the short to cover their bet, which would mean that the short would effectively have to buy the stock at the new, higher price

If a short is right and bets against a company, they can make a lot of money. But if they are wrong, they can also lose a lot more money

There are other options and tools to bet against a company’s future

The losses seem enormous from Jan Shorts lost $ 5 billion in bets against GameStop this year, according to Investopedia. Over $ 1.6 billion, or about half of those losses, occurred on Friday, January 29, when the stock jumped 51%

It’s also worth noting that GameStop started the year as one of the most shortened companies in the market

It is, but what is perhaps an even bigger indication of how dramatic these moves have been, stock markets have temporarily suspended stock trading for AMC, GameStop, and other fast-moving stocks dozens of times since the drama began

One reason for this behavior is the popularity of retail investing, or when traders who are not Wall Street pros buy and sell stocks, often with no fees, have made it easy for people to get into the market and social Media has helped people band together and stimulate each other to buy more and more stocks

“GameStop’s rally is part of a series of noticeable market moves that are worrying fund managers Some of them say that individual investor trading throws stock prices off balance with fundamentals, “The Wall Street Journal wrote when the drama began
Major trade trading apps like Robinhood, ETrade, and others are reportedly struggling to stay online despite all the hysteria in TD Ameritrade on Jan 27 acted to contain the sudden spikes in demand, “out of an abundance of caution in unprecedented market conditions”

Robinhood was also particularly scrutinized because it severely restricted trading of some stocks as the market fluctuated sharply this week Politicians on both sides of the aisle in the US have called for an investigation by the app maker. Meanwhile, many angry Redditors say that they will no longer use Robinhood.Some have even threatened to join a class action lawsuit

Nasdaq said it will cease trading a stock if it finds a link to unusual social media activity, the company sees its role as a “self-regulatory organization” in ensuring that its markets are “trading legitimately,” according to regulators need to keep up with the technology now available, “Nasdaq CEO Adena Friedman told CNBC 27 on January

For the past week, the markets temporarily stopped trading GameStop and AMC stocks, largely due to the large volatility in price and high volume

Of the stock trading apps, Robinhood appeared to be the most aggressive when it came to stopping buying highly volatile stocks like GameStop and AMC, the company hasn’t given any clear reasons other than vaguely saying it works in the best interests of the users, but the US government cannot agree

On Jan 29, the Securities and Exchange Commission said it is “closely monitoring and evaluating the extreme price volatility in trading prices of certain stocks over the past few days”

Robinhood was not mentioned by name in the statement, but the commission said it would “closely examine the actions taken by regulated companies that may disadvantage investors or otherwise unduly affect their ability to trade certain securities.”””

Robinhood declined to comment on the SEC statement. The White House referred questions about GameStop and brokerage firms to the Treasury Department, where the SEC is located

On Jan On 29, the company published a blog post stating that the company it works with to help users trade stocks started the whole drama of this company, a clearinghouse that does the transaction of stocks and cash facilitated between buyers and sellers, requires Robinhood and other trading companies it works with that they have a certain amount of money in deposits each day to cover their clients’ stock deals.This amount changes every day based in part on market volatility

Robinhood said increased stock trading had led its clearing house to require Robinhood to increase its deposits tenfold. “This has prompted us to put in place temporary restrictions on purchases of a small number of securities for which clearing houses had increased their deposit requirements,” said the company’s requirements are so great that businesses would have to be restricted in order to meet the requirements

“It wasn’t because we wanted to stop people from buying these stocks,” the company added. “This is a dynamic, volatile market and we have, and may continue to take, steps to ensure that we meet our requirements as brokers so that we can continue to serve our customers in the long term “

It was just over a month ago, on December 17, the SEC accused Robinhood of “repeated misrepresentation that failed to disclose receipt of payments from trading companies for forwarding customer orders to them.” What that means, in plain English, is that Robinhood has not advised users that their stock trades may be open to people competing against them in the market

Robinhood made a name for itself by offering stock trades with no standard commission that were often paid at other companies. The SEC said Robinhood made misleading statements and omissions between 2015 and 2018, including “on FAQ pages on its website, on its greatest source of income when it described how it made money – namely, payments from trading companies in exchange for Robinhood, which sends its clients orders to those companies for execution, also known as “payment for order flow” ‘”

The SEC estimated that Robinhood’s approach stole $ 34 million from users, even after factoring in the savings from not paying a commission

Robinhood agreed to pay $ 65 million to settle the fees “without admitting or disapproving the results of the SEC”

“There are many new companies trying to use the power of technology to offer people alternative ways to invest their money,” said Erin E Schneider, director of the SEC’s regional office in San Francisco, said at the time, “But innovation does not negate responsibility under federal securities laws”

GameStop failed to respond to a request for comment. BlackBerry executives told MarketWatch there was “no reason” known for the recent trading activity. BlackBerry reached an agreement with Facebook on a patent dispute earlier this month, although the terms were not known were given

There’s the seemingly simple money aspect that is compelling in and of itself when you’re so familiar with risk, but some of them also frame this as a crusade on Wall Street, “We’re at a war,” one Redditor wrote “A war for the redistribution of wealth”

In addition to being a prolific Twitter user, Musk recently learned that he can lead people into stocks of various companies, and he tweeted about how much he enjoyed buying something for his dog from Etsy, and the stock Now he tweeted about GameStop and sparked more madness

If you’re a fan of Comedy Central’s The Daily Show, on Jan. January published his first tweet in support of the Reddit crowd 28 Among other things, he also said that we clearly had not learned from the financial crisis

This is bullshit The Redditors don’t cheat, they join a party that Wall Street insiders have been enjoying for years Don’t turn them off, maybe we’ll sue them for copyright infringement instead !! We didn’t learn anything from 2008 LoveStewBeef

This is Keith Gill or Roaring Kitty on YouTube, one of the first to start this rally. He spoke to the Wall Street Journal and shared his story about how he never expected it

He publishes a screenshot of his stock values ​​from his ETrade brokerage every trading day, which he calls the YOLO (“You Only Live Once”) update. Many r / WallStreetBets members cite his stake in stocks as inspiration for their participation despite stock fluctuations “REMEMBER, if [he] can survive a 130% decline, so can you,” one Reddit user revealed as the stock began to fluctuate,

“I thought this trade would be successful,” Gill told the WSJ in Story published January 29, “but I never expected what happened in the last week”

It’s Saturday Night Live, of course, had a good laugh at the whole thing when the comedy show mocked the Reddit investors

“This is crazy, dude,” said SNL’s deputy for Reddit investors, “I’ve put all my money into GameStop and I can’t lose”

Aside from the good laugh, just seeing this drama is enough to turn your head For example on Jan 27, popular chat app Discord has temporarily banned the r / WallStreetBets community from service for violating their rules against hate speech and the glorification of violence, apparently some of the nastier elements of the community had repeatedly broken Discord’s rules, Discord said that the group should do better to keep control of this behavior

The group in charge of r / WallStreetBets’ Reddit board did it private in one evening, excluding anyone else who might be interested in joining

That seemed to scare investors, who suddenly got GameStop and AMC stocks diving at the same time, and soon the group was open to the public again, and it lifted the ban and promised to work with the community instead

Just over an hour later, the Reddit community was back to the public, the citizens had set up a new Discord chat group, and GameStop and AMC stocks recovered from their sudden slumps when you hung up your phone watching a movie before it happened, you may never have noticed it by the time it was done

Unless you might have seen Elon Musk tweeted about Discord not being cool anymore (Discord eventually reversed its decision)

Michael Burry is an interesting subject himself. He became famous for betting against the real estate market before the great recession hit in 2007 and 2008. He had invested in GameStop but also said that all of this behavior was “unnatural, crazy and dangerous” “

Of course, some of the Reddit members say they see this battle for GameStop as their Michael Burry moment, which makes it all the more interesting

Correction Jan 25 at 5:52 pm PT: Corrected the short selling explanation to make it clearer how the process works and that there are several ways to bet against a company’s stock price rising

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World News – FI – Reddit wants to send AMC and GameStop stocks to the moon Here’s how it happens

Source: https://www.cnet.com/personal-finance/reddit-is-sending-amc-gamestop-stock-stonk-to-the-moon-heres-how/