GameStop : short selling casino banking
The performance data on shares in GameStop, the video games chain of high street stores, represents past performance. It is not a guarantee of future results. GamesStore had planned to shut 450 stores in 2021. But hold on – GameStop shares are rocketing.
Triggered by a push by users on Reddit, small investors have piled in, buying shares and causing the stock to soar. In April 2020, a share in GameStore was worth $3.25. Last Tuesday that same share was selling for $148. But this isn’t about the small investors making money. It’s about their plan to cause pain to Wall Street traders who shorted the stock (betting on it tanking).
About 71.66m GameStop shares are currently shorted – worth about $4.66bn. Year-to-date, those bets have cost investors about $6.12bn, which includes a loss of $2.79bn on Monday. Monday’s stock gain of 145% in less than two hours, which extends GameStop’s gains for the year to more than 300%, is the latest sign that frenetic trading by individual investors is leading to outsize stock-market swings.
“We broke it. We broke GME [GameStop’s stock market ticker] at open,” one Reddit user wrote on Monday after the NYSE halted trading…
“This is the new day and age in which no one listens to the analysts: ‘Why bother, let’s just go out and buy it ourselves?’” Lars Skovgaard Andersen, investment strategist at Danske Bank Wealth Management, told the Wall Street Journal. “It is a sign of high complacency.”
And the hedge funds? One tells the FT:
“It’s not rocket science — massively reduce your shorts or risk going out of business,” Mr Block said. “This phase will pass, but in the meantime it’s best to be a spectator rather than a participant.”
“Will it end badly?” asks Thomas Hayes, managing director at Great Hill Capital hedge fund. “Sure. We just don’t know when.”
Who has the greater resources money and the stamina for the long position? And isn’t shorting a stock a good way to prick a price bubble?
Posted: 27th, January 2021 | In: Money, Technology Comment | TrackBack | Permalink
