What happened during the Game Stop stock craze in 2020?
In: Economics
A very talented and highly trained security analyst noticed that the stock was heavily shorted. This means that traders had borrowed the stock and sold it and would have to buy it later to cover the borrow. He did the math and figured out that if the stock went up and the traders were forced to cover, the price would zoom. He talked about this on Reddit and YouTube. Some people bought the stock, it did indeed go up a and a lot more people bought it, which made it go up more and the price took off.
Since then the price has dropped a lot and the company may or may not survive. Those that bought at the low price have made money. Those that bought near the top have lost money.
just go watch dumb money on netflix or any of the documentaries about it.
a guy that worked in investing decided to make a youtube channel and post on wallstreetbets and it took off and shattered the typical black shoals equation for options. he mostly bought shares. the hype of people buying options propelled it into a parabolic gamma burst. kind of repeatedly for awhile.
some people made life changing money. it just got a lot of publicity because it was so stupid. gamestop has been an awful company since forever. 😂
quick edit: he would give his thoughts [often](https://www.reddit.com/user/DeepFuckingValue/). and nobody believed or cared, or actively shat on him, for *awhile*. DFV is the guy in the thumbnail wearing the bandana.
Guy does fundamental analysis on stock. Realizes lots of hedge funds have massive short positions. Retail trading picks up steam with apps like Robinhood. Era of easy money (liquid), and stimmy checks. Stock spikes briefly drawing more attention, and then it’s basically a snowball.
Few made money, and even more lost their life savings. They were all trying to follow the footsteps of the original guy, but were really clueless about the market, and learned the hard way. Expect the cycle to repeat in a few years.
Lots of things need to be discussed to give an elementary explanation. So when people trade stocks, the most common way people trade that more people are familiar with is the “long position.” This is when you buy a share of the company expecting the company to do well which could see future dividends and raise the price of that stock, which you can hold to collect your dividends or sell at a higher value. Another way people trade stocks is called the “short position” or just “shorting a stock.” Instead of buying a stock, you borrow the stock first, then you sell the shares you borrowed. This is fine as long as you give the same number of shares back when the terms of the loan expire. You then buy back the shares and return them to the owner. If you sold the stock at a higher price than you bought it back for, that’s profit. So people do this with stocks they expect to decrease in value. It’s a way to make money off of struggling corporations.
It’s technically possible for the same share of stock to be shorted more than once. If I loan you a stock, and you sell it, the buyer could then loan those shares to someone else who then sells them again. In this way, it’s possible for more shares to be shorted than shares of the company actually exist. This was happening to Gamestop’s stock, whose code on the market is GME. Many people expected GME to keep going down in value, so they shorted over 100% of their shares, which is generally seen as very risky for reasons that became clear in this incident.
The subreddit wallstreetbets is generally for retail stock traders to talk about stock trading. There were posts on there arguing that GME is actually a good stock to take the long position on because there are reasons to expect them to do well and that their stock price is undervalued, and because so many shares are being shorted, there are many people that will have to buy the stock at any price. And the more of them that are taking the long position, the more it’s going to go up. So many of these redditors started buying GME at once. The stock price exploded. Now many large stock traders had to buy these stocks at much higher prices than they were expecting. And when they bought the stock at a high price, that just drove up the price even more. Money managers were panicking. Some hedge funds went bankrupt. And some redditors were making millions.
For an actual 5 year old: a few rich people sold something they didn’t have, and almost had to buy it back, at fair market price, but instead were able to have their bad bet cancelled / erased / delayed depending on the route taken.
The “craze” isn’t over and is about to get crazier as the company has a billion dollars worth of cash and is on target for a year of positive earnings.
Should be good.
And a quarter of the shares issued have been “locked” by a group of investors determined to expose the Ponzi scheme that pervades the system. Those investors have chosen to register their shares with a transfer agent instead of letting them be lent out thousands-of-times-over by brokers.
And everything on Earth going on is related to this on-going idiosyncratic risk. From war to hyperinflation, the wealthy are angry as heck!
Some rich motherfuckers, hedgefunds, decided to short gamestop stock (GME) because it was a shit company and its stock was overvalued. They were banking on the price going down so they borrowed a shit ton of the stock to sell at the overvalued price. They had planned to repurchase them at the future lower price and then return it to the lender. Some lucky mofo decided to buy game stock stock, posted about it in a sub full of degenerates (wallstreetbets), and lucked out. It became a meme and morons lapped it up.
People who didn’t know how to buy stocks without a shitty app that needs to advertise itself on reddit jumped on the bandwagon and inflated a shit company’s stock so the few at the very top (many many many millionaires) cashed out early and left all the literal regards holding onto a shitty stock.
The hedgefunds that were shorting the stock got bailed out really early. Like literally a week after the peak of the mania and stopped giving a shit. But all the dipshits still holding onto their lumps of coal hoping they’ll become diamonds are pushing it hard to make it still seem like their rocket ship is going anywhere but the fucking ground even after it crashed.
Morons under this very post still have no idea wtf happened when they talk about Robinhood and other shitty apps’ “manipulating” the stock by preventing purchases. It’s a shit conspiracy. The reality Robinhood and all those other apps ran out of money to pay their lenders that allows them to let their customers buy stock without needing to wait until their deposits are cleared which usually takes 1 to 3 days. Meanwhile, purchasing was completely normal on many no garbage sites but they’re too complicated for the average game stock “investor.”
Notice how they all use the same jargon to explain shit. They think they sound smart but, in reality, they don’t know wtf they’re talking about and are holding onto whatever gives them a tiny sliver of hope. They’re all cultists who are praying that their unrealized losses will eventually turn into gains LMMMMMMMMAAAAAAOOOOOOOO
Though I suspect this post and the comments is yet another shitty attempt to drum up interest and discussion about the dead horse again to get a few more suckers so they can finally make a whopping twenty cents instead of eating their losses of thousands or more.
Check out /r/superstonk.
A lot of these guys are speculating with superficial knowledge. There’s a lot of good due diligence out there that suggests the stock is still heavily manipulated… give it a look and do your own research, I’m sure it’ll pay off.
This isn’t financial advice by any means, just don’t listen to anyone on here that doesn’t back things up with raw data.
If you’re looking for some good watching material, there are several documentary style movies on streaming networks and one hollywood movie with Paul Dano as the instigator of it. The movie is called Dumb Money.
[Dan Olson’s video on the subject](https://youtu.be/5pYeoZaoWrA) is a pretty thorough explanation.
A lot of us got scammed into losing money because we were supposed to “hOlD aPe sTRonG toGeThEr”
Should have sold at $450 fuck my life. Bought at like 70, sold after the crash at like $50
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