Investment Thread

[bundabergdevil]

The more I read about the GME stock, the less it sounds like a forum mob run on the stock, and the more it sounds like a pretty shrewd Reddit user who leveraged a small amount of knowledge with a large amount of frustration to really put some of the pros in an extremely tight situation.

From the outside, it is rather amusing to see the Big Boys get their jimmies rustled.

Thank you for introducing me to “jimmies rustled”.

[kshepinthehouse]

What if it turned out that the Reddit moderators were just principals of another hedge fund? (I’m not saying that’s the case). Would you still say nothing done was wrong?

And if the answer is nothing was done wrong, I guarantee you that one will try it in the future.

I don’t know enough about this to be honest to have an educated conversation. But, from what I understand, they didn’t do anything that hedge fund managers don’t do on a daily basis. It seems like everyone is upset because they aren’t “Wall Street guys”. I do see the danger is when the average joe jumps on board and puts his life savings at risk by just reading a Reddit post

[Jeffrey]

Thank you for introducing me to “jimmies rustled”.

I’ll be damned if I say “thank you” the next time somebody rustles my jimmies.

[budwom]

I don’t know enough about this to be honest to have an educated conversation. But, from what I understand, they didn’t do anything that hedge fund managers don’t do on a daily basis. It seems like everyone is upset because they aren’t “Wall Street guys”. I do see the danger is when the average joe jumps on board and puts his life savings at risk by just reading a Reddit post

The current irony is that a lot of people got into the stock (via Reddit) to screw with the hedge funds (fine by me), and now they find themselves in a predicament of their own making, trying to extricate themselves from the stock. It's not a game, lads!

[duke79]

I agree and don’t see what they did wrong.

I'm not a securities lawyer but this episode does have many of the hallmarks of what they used to call a "pump and dump" scheme - a group of investors would conspire to drive the price of a certain stock higher by buying more and more shares in the marketplace and/or creating false publicity about a stock; other outside investors, intrigued by the upward movement of the stock, would then begin buying the shares, driving the price even higher. The original investors would then sell their shares to the new investors (the "suckers"), often at a substantial profit. You may go to prison for securities manipulation.

[duke79]

I don’t know enough about this to be honest to have an educated conversation. But, from what I understand, they didn’t do anything that hedge fund managers don’t do on a daily basis. It seems like everyone is upset because they aren’t “Wall Street guys”. I do see the danger is when the average joe jumps on board and puts his life savings at risk by just reading a Reddit post

No doubt many hedge fund managers play somewhat similar games (on a regular basis) but maybe not quite so open and concentrated.

A bigger question is how much the regulators should protect people from their own greed, stupidity and gullibility.

[Channing]

One of the hallmarks of the US markets is that they are largely drive by institutions which tend to act rationally which, in turn, has resulted in a relatively stable market. Periods of volatility are driven by underlying factors that generally warrant the volatility. Contrast this with other markets around the world, such as China, where the markets are generally driven by individuals, and thus much more prone to irrational swings. Divorcing myself from the feel good nature of the hedgies getting their com-uppance, my guess is we are all better off with the former rather than the latter. However, I saw a tweet somewhere about regulators planning to step-in so the hedgies could level their ship - that bothered me as there is no chance they are going to step-in to help protect the individual investors on the way down.

[Tripping William]

One of the hallmarks of the US markets is that they are largely drive by institutions which tend to act rationally which, in turn, has resulted in a relatively stable market. Periods of volatility are driven by underlying factors that generally warrant the volatility. Contrast this with other markets around the world, such as China, where the markets are generally driven by individuals, and thus much more prone to irrational swings. Divorcing myself from the feel good nature of the hedgies getting their com-uppance, my guess is we are all better off with the former rather than the latter. However, I saw a tweet somewhere about regulators planning to step-in so the hedgies could level their ship - that bothered me as there is no chance they are going to step-in to help protect the individual investors on the way down.

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[MChambers]

I'm not a securities lawyer but this episode does have many of the hallmarks of what they used to call a "pump and dump" scheme - a group of investors would conspire to drive the price of a certain stock higher by buying more and more shares in the marketplace and/or creating false publicity about a stock; other outside investors, intrigued by the upward movement of the stock, would then begin buying the shares, driving the price even higher. The original investors would then sell their shares to the new investors (the "suckers"), often at a substantial profit. You may go to prison for securities manipulation.

I am a securities lawyer (or an SEC specialist, like Paul Finebaum), and you raise some good points, but the law isn't all that clear.

Did a "group" of investors conspire, or did a bunch of them decide to take action based simply on a Reddit subforum? Where is the line where they become a "group" or "conspire"? It's not an easy line to draw. If you are a group, you need to make public filings if you own 5% of more of a public company.

As far as fraud or manipulation goes, it's an easy case if someone knowingly made false statements about Gamestop (assuming that the government can show reliance on the false statements). If not, however, it gets very hard. What is manipulation? I don't think there's anything manipulative about deciding to buy stock knowing there is someone with a 150% short position.

[kshepinthehouse]

I am a securities lawyer (or an SEC specialist, like Paul Finebaum), and you raise some good points, but the law isn't all that clear.

Did a "group" of investors conspire, or did a bunch of them decide to take action based simply on a Reddit subforum? Where is the line where they become a "group" or "conspire"? It's not an easy line to draw. If you are a group, you need to make public filings if you own 5% of more of a public company.

As far as fraud or manipulation goes, it's an easy case if someone knowingly made false statements about Gamestop (assuming that the government can show reliance on the false statements). If not, however, it gets very hard. What is manipulation? I don't think there's anything manipulative about deciding to buy stock knowing there is someone with a 150% short position.

Did they lose at their own game?

[acdevil]

https://twitter.com/wallstcynic/stat...154616835?s=21

Link that explains some regulatory issues which may be behind the RH decision to restrict buying (as opposed to some nefarious conspiracy).

Also seeing more and more signs that there may be some HFs that have made a killing on the GME saga and may have used the WSB Reddit as a cover for their short squeeze.

[YmoBeThere]

https://twitter.com/wallstcynic/stat...154616835?s=21

Link that explains some regulatory issues which may be behind the RH decision to restrict buying (as opposed to some nefarious conspiracy).

Also seeing more and more signs that there may be some HFs that have made a killing on the GME saga and may have used the WSB Reddit as a cover for their short squeeze.

The volume of trading suggests institutional capital, particularly when looking at where the share prices went.

[MChambers]

https://twitter.com/wallstcynic/stat...154616835?s=21

Link that explains some regulatory issues which may be behind the RH decision to restrict buying (as opposed to some nefarious conspiracy).

Also seeing more and more signs that there may be some HFs that have made a killing on the GME saga and may have used the WSB Reddit as a cover for their short squeeze.

Apparently the clearing house insisted on more capital from Robinhood, so Robinhood had to raise money quickly. This also would explain why other brokers also restricted trading. Heard this morning on NPR that Robinhood will loosen the restrictions today.

[bundabergdevil]

The volume of trading suggests institutional capital, particularly when looking at where the share prices went.

Yeah, this is what I didn't understand about the early reporting, which made it sound like an electronic herd of individual investors. That would have been VERY surprising.

[bundabergdevil]

The ride continues with GME. It’s like what I imagine a video game about trading would be like.


Who would be the final boss in that game?

Warren Buffett? Nelson Peltz?! Alan Greenspan?!?!

[CrazyNotCrazie]

Every time I read about Game Stop I come back to this scene:

[PackMan97]

The ride continues with GME. It’s like what I imagine a video game about trading would be like.


Who would be the final boss in that game?

Warren Buffett? Nelson Peltz?! Alan Greenspan?!?!

It's interesting to think about it...what happens if all the GME stock is bought and no one is willing to sell? A lot of the WSB crowd seem to want to try and break the market by refusing to sell at any price.

[Channing]

It's interesting to think about it...what happens if all the GME stock is bought and no one is willing to sell? A lot of the WSB crowd seem to want to try and break the market by refusing to sell at any price.

Without getting into whether or not it is feasible under securities law, it would seem to be unthinkable that GME isn't doing everything in their power to offer more stock into the market place. This event could allow them to raise enough capital to clear debt from their balance sheet with just a few points of dilution. If I'm the CEO I am firing one person an hour from the finance department until my offering is live (again, fully acknowledging I have no idea how IPOs actually work). Its reminiscent of Hertz's failed offering over the summer where the prospectus advised people would likely lose all their money.

[duke79]

I am a securities lawyer (or an SEC specialist, like Paul Finebaum), and you raise some good points, but the law isn't all that clear.

Did a "group" of investors conspire, or did a bunch of them decide to take action based simply on a Reddit subforum? Where is the line where they become a "group" or "conspire"? It's not an easy line to draw. If you are a group, you need to make public filings if you own 5% of more of a public company.

As far as fraud or manipulation goes, it's an easy case if someone knowingly made false statements about Gamestop (assuming that the government can show reliance on the false statements). If not, however, it gets very hard. What is manipulation? I don't think there's anything manipulative about deciding to buy stock knowing there is someone with a 150% short position.

Thanks for this info! Yea, I figure it would be extremely difficult to charge and convict these "Reddit" traders (if you want to call them that) with securities fraud or other violations of securities law, just based on chatroom chatter. But I'm sure the authorities will take a close look at what happened.

https://www.bloomberg.com/news/artic...t?srnd=premium

[duke79]

Without getting into whether or not it is feasible under securities law, it would seem to be unthinkable that GME isn't doing everything in their power to offer more stock into the market place. This event could allow them to raise enough capital to clear debt from their balance sheet with just a few points of dilution. If I'm the CEO I am firing one person an hour from the finance department until my offering is live (again, fully acknowledging I have no idea how IPOs actually work). Its reminiscent of Hertz's failed offering over the summer where the prospectus advised people would likely lose all their money.

Yea, no doubt that all of these lousy companies (GME, AMC, etc) whose stock price is being bid up by the so-called Reddit traders should be trying to do equity offerings as quickly as possible to raise as much money if they can find enough "suckers" who will pay exorbitant prices for their shares.