Title. How does a stock move so violently without any news from the company?
In: Economics
No one can really answer this question as the origin of the huge volume isn’t clear, but yesterday there were almost 200 million shares traded including pre and post market and that’s more shares than are available to trade
That much volume can only make the price go up
Stock prices are ultimately determined by supply and demand. If lots of people who don’t have it yet want it, they will bid increasingly high amounts until they get it. This demand doesn’t have to be rational or linked to any news: if you had enough money or friends, you could pump up the share price of many stocks just by buying at ever higher prices. Every now and then a stock price rises for the dumbest reasons: a company stock ticker is confused with that of a similar company that had big news, or a company renames itself to have “crypto” or “AI” in the name and people flock to invest. (Really, this happened.) I can’t tell you what’s happening to Gamestop or AMC, but the basic answer to your question is, the price is rising because more people want to buy the stock. I don’t know why they want it, though.
GME is a memestock and as such it has a lot of… irrational… retail investor interest and behavior. If you want a dive into the history and mentality behind it, youtuber [Dan Olson did an amazing documentary](https://www.youtube.com/watch?v=5pYeoZaoWrA) that goes into it.
As such if the community that is invested in it, both figuratively and literally, gets hyped for some reason it can lead to wild swings in prices divorced from normal price discovery mechanisms or even just outright reality.
As for why it shot up this time, it seems that Roaring Kitty aka Deep F**kingValue aka Keith Gill, near enough prophet to the apes on r/wallstreetbets who has significant association with GameStop investing (the doco above goes into it), has broken his [years long silence and posted a meme and a bunch of movie clips to twitter](https://twitter.com/TheRoaringKitty) expressing vague bullish sentiment, and so the apes have gone wild.
Appears, from forms, to be many stock buybacks from the company. Not all of it so the rest may be institutions etc we dont know rn
[deleted]
A stock’s price is influenced by 1. News, 2. Fundamentals and 3. Expectations of investors.
3 typically is informed by 1 and 2, this however is not necessarily the case for what we colloquially call “meme stocks” (which I do not have a good definition for). We just observe that for certain types of stocks popular in online communities, expectations of investors are less informed by 1 and 2, but more by general sentiment of the respective community, which often forms their opinion based on previous sentiment, more and more decoupling the value of the stock from anything tangible in the real world.
In the case of GME: a user called Roaring Kitty, who started the original rally behind the GME stock by sharing his analysis that the stock was being shorted to an unusual degree, posted a meme on his Twitter after several years (? Months? ) of silence. The online communities interested in GME interpreted this tweet to mean that roaring kitty is “back in the game” so to speak, meaning that even if there is no specific news regarding GME to be found, this one person who saw the original opportunity supposedly is seeing something else now, causing everyone to buy the stock in hopes of getting in on that short squeeze they have all been dreaming about for years.
Anyone who replies “because DFV tweeted” has utterly no idea what’s going on. Reading replies like these are frustrating as hell… a tweet does not cause 170,000,000 shares to be purchased “by retail” on a single day. In fact if you look at the volatility and volume of the share for the week prior to yesterday (starting 34 days passed the March options expiry date) you can see the volume share to drastically increase.
The answer is, the real reason is not yet understood but there are a few theories which can explain it, or potentially a few things happening concert.
Working ideas are: XRT ETF failure to delivers are getting harder and harder to rollover and kick down the road. These have increased over the last 2 years.
Long term Basket swaps are expiring and this is a cyclical event, shorts never closed they covered, there’s a difference.
Inside buy back, this is due to some interesting screen shots from Bloomberg terminals.
Option gamma thesis; it was theorized that if the stock went to around $15.XX it would rocket to $36 because of option chaining. This happened last week into yesterday. Typically the upward momentum is stopped where the chain stops at (unless it’s an expiry date and the options are exercised) because there’s no calls for higher strikes. The calls contracts stopped at 36.00 strikes, until yesterday. today they will open more up at higher strikes. The share price will continue to rise if these are filled, likely capping at $55.00 per share on May 14th. This cycle should continue into early next week if new calls are opened and purchased as we approach the expiry date of Friday.
The real question is why it tanked so much in the first place (spoiler: illegal naked shorting from hedge funds)
People are dumb and buy off some guy said something for the first time in years who predicted/cause a run last time with GME
Answering this question on reddit is very tricky. There is a considerable number of people on this site, who have a meaningful financial investment in GME. As a result they have a conflict of interest, since they financially benefit from a rise in stock price.
Yet this stock price (even before it’s recent increase) is massively above anything, that could reasonably be justified by the facts or performance of the company. Purely looking at the business of gamestop, the price of its stock makes no sense; it’s massively overvalued. This value is based on a varying set of theories about massive financial fraud, which supposedly could be uncovered by the purchase and refusal to sell GME shares. Yet the reasoning or evidence behind these theories is so far removed from reality, that it’s impossible to make sense of it in an ELI5 manner in a reasonable comment length. Dan Olsen, aka Folding Ideas, made a good (https://www.youtube.com/watch?v=5pYeoZaoWrA&ab_channel=FoldingIdeas) explaining the issue; it’s over two hours long!
But at its core it’s this: The people who currently have a large financial interest in GME prices being high, need other people to buy into their believes, since that creates demand for their stocks and hence raises prices. Since it’s current value is above anything based on normal stock valuations, they need people to believe their highly questionable theories. Hence they have a clear incentive to spread their theories. And there is nothing preventing people from upvoting falsehoods benefitting them or downvoting reasonable criticism. A look at the post history on r/wallstreetbets or r/superstonk will show massively upvoted posts with virtually no criticism (especially the latter), despite reality having since proven their ideas very wrong.
The price of GME has gone up and down for years now, often without reasonable cause. The current increase likely has a lot to do with a central figure to the aforementioned theories having returned from a long time social media hiatus. But trying to find reason in GME price movements carries considerable risk of turning one insane.
Latest Answers