What a time to be alive. What a difference a week makes. My last post spoke about how depressingly mundane life has been under lockdown. Then GME happened.
Reddit shitposter autists united to take on Hedge Fund billionaires in all out war over short stocks of GameStop. A week ago I knew nothing about trading or investing. Now I'm engrossed. It's much more entertaining watching GME stock price graphs than Covid infection graphs.
The long and short of it is this. A hedge fund called Melvin Capital bet against GameStop. They borrowed shares they didn't own, sold them to retail traders (every day folk) with the intention of buying them back for cheaper when their value fell lower. Then they could return them to the lender, and net a nice bit of profit from the difference. But wait. What if the retail traders refused to sell them back?
Well, ponder no longer. We are seeing it unfold right in front of our eyes. The retail traders liaised on Reddit and Discord, and decided to "stick it to the man" by holding onto the shares. This leaves Melvin Capital in deep shit when the time comes to return the borrowed shares... because they don't have them. As demand rises for the shares, the value increases making it even more painful for Melvin to buy them back. Currently the number floating around is that it's costing Mevlin around $19,000,000,000, and making them insolvent. This news inspires the retail traders to hold even tighter, despite the astronomical increase in the value of their shares which would motivate people with "paper hands" to sell whilst they can to make a fast buck. It seems a large proportion of the traders have "diamond hands" which means they're riding the meme stock to it's conclusion. Many of them are accepting they're going to take personal losses, but they consider it worthwhile if they bleed out a few hedge fund billionaires along the way.
What is more interesting is that trading apps such as Robinhood (RH) started to prevent the purchase of GME stock through it's platform. This rallied the retail traders even harder with accusations that RH was enacting market manipulation to intentionally prevent them from continuing their mission to bleed out the rich. The allegation continues that RH was allowing hedge funds to trade, but limited retail traders to only being able to sell GME so that the hedge funds could recuperate some of their missing shares leading to many funny memes, along with much justified anger. Even politicians got involved in the judgement.
To put the level of leverage into perspective, Reddit user DeepFuckingValue is making an absolute killing from the shares on paper.
It's interesting watching this shitshow unfold, and I even tried to get in on the action myself however FreeTrade failed to verify my identity (because I make myself difficult to find) meaning my account is stuck in limbo, possibly until this is all concluded.
So I will sit at the sideline, and watch for the short squeeze, hoping to see many of the /WallStreetBets guys fly their rockets into the sun for the tendies. Hold boys with those diamond hands, apes stronk together.
Because you know as well as I do; we like this stock.
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