Can someone explain about GameStop

[eclipse]

What’s this about ?

[Lady Ty]

This is one of best explanations I have seen. Apologies it comes from Reddit via the despicable Twitter.
https://twitter.com/_jimmykelly/status/1354600999835607041?s=19

[Bender]

From a poster in another site....

Long short story: hedge funds shorted the company like hell (around 130% of shares are shorted). A part of shares are held by Vanguard, Fidelity et al, and now some guy who is the next big thing bought 12% of it, meaning that 40% or so of shares cannot be sold. Then someone saw this and put in Reddit wallstreetbets which seems to be full of gamblers who put serious money in stuff they don't know what it is. But, they fecking bought a lot of shares, and now shorts who wanted the company bankrupt to get hundreds of millions when closing their positions are fecked cause there aren't enough shares to buy. And obviously, this is making the prices skyrocket. The meme community is putting shares to sell at ridiculous prices like 500 or so, and asking their brokers to not allow borrowing them (apparently you can do so). This in turn means that for shorts to be able to close their positions, they need to buy shares at higher prices, in turn making the price go even higher.

So essentially a clusterfeck, but it also seems a way of making some serious money in short-term.

[Magnus Hedén]

The image in the tweet has the best explanation I've seen so far.

It's telling that NASDAQ is calling for stricter regulations (they are notoriously anti-regulation) because a crowd organised on Reddit did exactly what rich people have been doing for decades in order to get richer. The measures now getting put in place just confirms that the system is designed for the rich; they are trying to block this from happening by placing targeted restrictions on trades for the affected stocks in order to stop people from breaking their rigged game. You know it's serious when Ted Cruz agrees with AOC.

[Rostum]

I was toying with posting about Gamestop in the politics thread. Gamestop is a niche business and has a cash flow issue as well as a falling stock price. Being the last real player in a dead industry. A hedge fund decided to go after them by shorting their stock an investor borrows a stock, sells the stock, and then buys the stock back to return it to the lender. If the price falls they make money if not then they have to pay the current price and lose accordingly.

Some shit posters (actually about 1% of those using the page) on reddit decided to foil this and bought gamestop stock causing a bubble and inflating the stock price. I am guessing a lot of them are sentimental about where they used to exchange their old console games or whatever in their childhood. This was all very public and not very political except in a 'sticking it to the man' fashion.

A hedge fund has died over this and the redditors will also likely lose money long term. A few people are up millions who saw what was happening and went big and quickly cashed out.

Now shorting isn't investing it an active attack on a company and often bankrupts the victims. You are betting someone fails.

I have seen the alt. right held responsible for this in the press and white supremacists (yawn) yet again when actually it's a bunch of twenty something's meming the hell out of it all over the internet getting attention. Many of whom as kids saw their families go through the 2008 crash and saw the people who caused it bailed out while their parents lost their houses.

Investors associations, big companies and the Sec have all called for regulation. Of course they all fought regulation in 2008 and have had the rules relaxed since making another crash inevitable. Now they want it to stop plebs costing them money. Let the meming commence!

I actually had no idea how vulnerable shorters were. It really took a trivial amount of investment to cost Melvin Capital $13 billion and a few billion in loose change across a number of other funds.

[Rostum]

OK some second thoughts on this.

The GameStop debacle has cost hedge funds $70 billion to date.
The entire industry is screaming for protection (legislation and criminal law)
There are armed guards outside The Bull on Wall st. To protect a private exchange.

WTF is going on?
In the West we live in a consensual participative democracy one set of rules is meant to apply to everyone.
Wall Street Bets is not a new thing, I didn't know, but they have been playing this game for years search dankest trades for details. GameStop was a perfect storm for them and massively raised awareness.

The situation now is little people are burning money to hurt the hedge funds and while this continues it shows a massive weakness in the system and a need for reform.

[xiagan]

This should have been addressed after 2008, but the hedge funds were allowed to play their rigged game and didn't even get a slap on the hand. That they got beat at their own game is awesome and will hopefully lead to more regulations, benefiting us tax payers.

[Rostum]

I think the shout for regulation is the last resistance to changing an unsustainable model.
The problem is those hedge funds are also peoples pensions.

The best solution to 2008 I ever heard was instead of bailing out the banks in the UK £42,000 should have been given to every adult. They would either have spent it or saved it. Either way the banks would have got the money but personal debt would have been wiped out and the banks punished by losing those interest payments.

[Bender]

I think the shout for regulation is the last resistance to changing an unsustainable model.
The problem is those hedge funds are also peoples pensions.

From what I know, Pensions are protected and Funds can't invest it in anything other than top rated securities. Plus they get repaid first if anything goes wrong. Risk of pensions being misused is nearly non existent.

[Bender]

The best solution to 2008 I ever heard was instead of bailing out the banks in the UK £42,000 should have been given to every adult. They would either have spent it or saved it. Either way the banks would have got the money but personal debt would have been wiped out and the banks punished by losing those interest payments.

That's a very populist and totally useless solution. With banks in threat, everyone would hold it in Cash. Also banks have their own debts to pay. Be it deposits or otherwise, banks also borrow to lend. And without stimulus, their debts would come due and complicate it's be enough to threaten the whole system. If banks go kaput, think of all those who'd lose their savings.

The solution was correct, it just didn't have the stick with the carrot. Banks should have had more regulations restricting bonus payments to CEOs and rules on how they can use the money.

[Rostum]

The solution was correct,

what one banker going to prison and the bailout used to pay bonuses for the rest. I would say the solution ensures it happens again and again.

[Bender]

The solution was correct,

what one banker going to prison and the bailout used to pay bonuses for the rest. I would say the solution ensures it happens again and again.

Now you're just twisting the discussion. I obviously meant the decision to bail out. And I've already said that the way the bail out was implemented (bonuses et al) was just plain bad.

[Rostum]

Yes I am, but I am also aghast you can think bailing out billionaires and ignoring losses of the average American was in any way correct.

The very real decision which paved the way to bailout was ignoring the regulatory fraud of the firms involved, the two standards companies and of the watchdogs who not only failed to stop the rules being breached but pretended it didn't happen. There should have been hundreds if not thousands prosecuted and total reform of the financial sector instead the government stepped in and limited the damage while people lost their homes and received no protection.

Socialism for the rich and capitalism for the poor in America.

[Bender]

There are two parts to the solution. The important one is to shore up the financial system which is already hit and prevent it from expanding to a wider collapse. The less important issue is post mortem of the event and dole out punishment and implement preventative measures.

The bail out actually brought confidence back into the market and brought comfort to the people that the banks who have their money are still safe. It prevented widespread panic which would trigger withdrawals leading to even more banks failing. Now, though the objective was achieved, it still resulted in CEOs gaming the system and taking a lot of personal credit to themselves rather than it's intended use.

The second also worked partially, as rules surrounding trading are significantly more severe than they were then. Would it prevent another collapse? Probably...but can't guarantee it. Laws in financial services are usually reactionary in nature.

[Rostum]

So the shoring up the financial system was achieved in part by relaxing regulation allowing billions of dollars of drug money to be banked legitimately. Further regulation was fought by pretty much everyone and while reams of legislation was written nearly none of it has ever been enforced. It was nice set dressing to show lots was done though while changing nothing.