I am not an investor. Explain the Game Stop thing to me please

Off-Topic Games, Gaming and Hardware
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I keep reading about a “short squeeze” and selling short, borrowing stock and buying it back… lots of questions on my part, and these columnists don’t explain it very well.

What happened?

–EDIT–
Ok, after reading your replies, I will try to equate this to a scenario from WoW:

What Normally Happens–
Your guildie gets a rare tradeable mount. You tell him you can make some money for him AND you can get his mount back to him by Sunday midnight. He just need to let you borrow it. You promise to give him some amount based on the value of the mount. He gives you the mount.

You check the AH and the mount is selling for 100K. You sell it to someone in trade chat for 100K. You then tell everybody how they can get a mount worth 100k and they all go farm for it. Next thing you know, the AH is flooded with these mounts. The price is now 10K. You buy one for 10K, give it and the percentage based on the current value to your guildie. Done deal. You made around 90K for yourself, minus the small cut to your guildie (let’s say 5% of the sale, or 500 gold).

What Happened–
When the price for the mount dropped to 10K, you waited for the price to drop even further. You got greedier. Some folks bought up all the mounts when you weren’t paying attention and started selling them for more than the original 100K…more and more people started selling them for higher and higher prices. You not only have to buy a mount by Sunday midnight for your guildie, you also have to give him some percentage based on the value as well.

More people want the mount than there are mounts available. You have to sell a bunch of your items in the bank to have enough to purchase one. You buy two WoW tokens on each of your three accounts. By the time you have enough money, the price is 2 million gold. You buy it, give the gold (5% of 2 million, or 100K) and mount to your guildie, and are now broke in-game and in real life.

Correct me if I didn’t get this right.

(this is WoW-related because Game Stop sells – or used to sell – World of Warcraft).

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it’s a way to artificially inflate the value of a stock to make it seem more prosperous than it is.

It’s kinda-sorta like… buying up all the soul dust in the AH when it’s low and then re-listing it at an inflated price to make it seem like it’s more valuable.

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google is this way >>>

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Let me help someone else become the next millionaire over night. Go put stock into Blockbuster, you’re welcome.

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“They” got out-“they”ed

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Long story short… The stock market is volatile and easy to abuse if you know how and have the resources to do so.

A group of people have demonstrated this using Game Stop’s Stock.

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And then they are trying to stop people from buying so they can “investigate” what happened. While senators made millions from insider trading and did nothing, normal people getting rich is a concern for them

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Shorting a stock is the process of selling borrowed shares of a company with the promise of buying them back at some point in the future. You are betting the price goes down, a company is overvalued. You borrow and sell the shares at $10 hoping you. Buy them back at $8. You made a $2 profit. It’s part of the efficient market theory of price discovery of any asset, all the buying and all the selling by lots of market participants results in the right price.

The problem is that a stock has unlimited upside so there is no guarantee of how much money you lose if you need to buy back the stock, close out your position, if the price rises above $10. It can go to $20, $50, or $100. At $100, you’ve lost $90 on that one trade.

Hedge funds need to post more and more collateral as the price increases since their brokers require maximum amounts of borrowing based on your financial condition.

The Reddit crew are driving the price of GameStop up via buying demand, lots of little investors going after one company has the same effect as a giant investor buying. Price goes up.

Hedge funds are being made to post more collateral against their short in GameStop and are selling their long positions, shares they actually own, to post the cash.

Hope that helps.

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Ironically the “victims” in this are the people literally specialized into exploiting the market this way.

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A short squeeze is what GameStop does to you when you want to trade in your 30 Assassin Creeds game and they only offer about three-fiddy.

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“Oh no no no, people are trying to escape our progressive rollout of neo-feudalism.” - la li lu le lo

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You can find Louis Rossmann on youtube, recently he explained pretty nicely what happened, even person as stupid as myself could understand.

But in couple words: hedgefonds borrowing stocks and selling instantly. When you borrow stocks, you have to return them later. They playing short, meaning they don’t want your company to prosper, they interested in your fail. Because month later if stock price goes down, they buy back same amount of stocks and return them. If you sold them for X and bought back for much less than X, difference is going into your pocket.

These guys are looking for companies which most likely going down in price. Except this time happened that someone leaked information on reddit/4chan and people jumping on buying, which made stock price really high, that high that now hedgefonds own around (in doctor evil voice) 2.5 BILLION DOLLARS!

Of course invisible hand of market instantly became government hand and they freeze GME trades and bailed out …ing parasites.

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Basically:

Edit: new info I’ve come across, apparently some hedge funds were looking to short Gamestop up to 140% of their stock value while they couldn’t even operate during the pandemic. Thus sending the company to bankruptcy and losing 15,000 people their jobs. Which starting this whole plan to pump up GME.

/r/wallstreetbets started a meme trend, let’s start buying Gamestop stock because Gamestock sucks for fun.

Since it was only like $10 a share, folks with disposable income said “Screw it, why not, it can only really go up.”

Well people took the meme to the moon and started buying tons of GME shares, then more normal people outside of WSB caught wind of it and bought more, rocketing the value up to $155 a share in a week. Then predictably it became mainstream, and people started selling to make money.

Thus WSB memed a bunch of people into becoming millionaires, showing the power of the internet.

They may be attempting the same thing with Blackberry stocks, but I wouldn’t hop on it, if anything, it got me to sub to WSBs and shows how game able the stock market it is with an internet hivemind.

EDIT: The original goal was to screw over Hedge funds companies and make a profit doing so. Hedge funds have a tendency to take out “shorts” on stocks where they borrow shares as a loan. They borrow the stock when it’s a bit higher so they can make money with it, then pay off their debit when the stock goes low to make maximum profits.

Shorting is not generally something normal civilian traders can do, so WSB wants to make the price for GME go through the roof high, and keep it there so when the hedge funds run their timer they have to pay back their shorted shares at an 800% loss. This bankrupts the Hedge Funds.

Hedge fund companies are well known for being scummy and utilizing blatant market manipulation (such as hiding GME and other stocks right now on trading apps to get people to panic sell) and were a big cause of the 2008 financial crisis which still cripples people to this day.

So all WSBs has to do… is nothing. Don’t sell, no matter what, the more people not selling, the faster the stock increases in value, and the more they screw over the hedge funds.

Naturally the Hedge funds are pissed and scared because unlike the “march on Wall Street” this genuinely hurts their bottom line, and sticks it to them in that normal people can be just as scummy as the investment companies that get regular bailouts from the government.

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Basically a bunch of people gambled that gamestop would crash. Others gambled that it wouldn’t. The stock hasn’t crashed yet and is actually outperforming how a lot of people thought it would do. The stock market is subject to a lot of wild oscillations and investor manipulation.

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Systen was always gameable though, what’s scaring them is the realization that this knowledge can spread like wildfire thanks to it.

NASDAQ’s CEO is literally talking about monitoring Social Media discussions around stocks.

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Tbh this is probably like the one way the poor can game the rich.

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Which is why they will try to squash any other attempts at this.

A lot of these people are just “rich”. They got where they are because their family had money and were in the “know” of stocks and such, this is literally protecting their way of life to them as some of them probably can’t put a sandwich together without their maids.

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The funny part about this whole problem lies with those rich jackass exploiting during the whole COVID time to buy GameStop on low price and sell it back on high when the market becomes stable.

At which some point that people decided to screw them back by buying the stock out and over inflated the stock price to the point they are unable to buy it cheap.

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Gotta put a stop to that “outsider trading”.

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Not just that, but investing tends to rely on predatory behavior, esp of normal everyday people who don’t have a clue about the market.

Suddenly people playing the same game they all are due to the internet and social media trends is something they are highly invested in not happening.

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