russ_watters said:
that's a long rant with some conspiracy theory/counter-culture -ish vibes that I don't agree with
Really? Understanding what FTDs are (this is public information from the SEC by the way, has been since I believe 2004 - but even the public data needs to be viewed with the context that is not difficult to hide FTDs, and the reports to the SEC only come from within the NSCC's "Continuous Net Settlement" (CNS) system. If the NSCC decides that it doesn't want to be liable for some trade in the CNS, they can simply decide that trade is a "Special Trade". Instead of clearing it through CNS they can force the trade to clear via the Obligation Warehouse - which doesn't report FTDs to the SEC.) and what 8 million of them last month for just ETFs
containing GME means is "conspiracy theory/counter-culture -ish"? If you are basing this conclusion on a better understanding of stock market structure and function I would very much appreciate an explanation of where I'm wro-...
russ_watters said:
but don't want to get into.
...oh.
russ_watters said:
If you play a soccer (football) game and instead of trying to score goals you focus on kicking your opponents in the shins, you might succeed in breaking some legs, but you won't win the game. And you might also break your foot.
A more apt analogy for this would be kicking the ball towards the goal because you think the goalie is a cardboard cutout, actually scoring (what happened in January 2021), and then not believing the other team's coach when he tells you he put a real goalie in this time.
russ_watters said:
Unless it closes and is taken off the market.
This is ultimately the goal of the short selling institutions, because it would mean they never have to cover their short positions. It is in the best interest (see: not doing this is literally an existential threat) of anyone who shorted GME to do anything and everything possible to ensure that GameStop either goes bankrupt or GME holders sell for a loss, because un-covered short positions have theoretically unlimited risk. How? It's quite simple - a short position means you borrowed someone else's share and sold it with the expectation that it will be cheaper to buy in the future. If you were right, you pocket the difference as profit. If not - you still don't own a share to give back (because you sold it, but, again, you never actually owned it), so you either give the owner you borrowed from one of your own or you have to go out and buy another at whatever price it currently is (this is "covering" the short).
That is why FTDs are so important - even if likely under-reported, it's an unavoidably public indicator of when the short sellers couldn't find shares to replace the borrowed ones, so they'll have to go out and buy more... before the end of a period roughly 35 calendar days from the FTD declaration, which for the aforementioned 8 million FTDs would start tomorrow (i.e. January 21, 2022) through I believe February 8th if they used every delay tactic possible (there are quite a few, and big market players tend to heel drag as a general rule). This creates immense buy pressure, and buy pressure on a stock that has become increasingly illiquid (i.e. current holders just aren't selling, and so many shares have been pulled out of DTCC circulation that the DTCC's usual methods of preserving liquidity are already starting to become ineffectual - fun fact,
legal naked short selling
by the DTCC itself is one of those liquidity preservation methods... and it would be absolutely disastrous to try it in this scenario) has enormous potential to increase the price, which is why so many additional short positions have been opened in the last few weeks (also public info) to suppress price (and that is indeed how that works - betting against a stock makes additional betting against the stock more viable, but more bets increases squeeze risk - the selling of the borrowed stock pushes the price down, even as you're betting the price will go down, but you still never actually owned the stock you sold, so you owe somebody at least one stock; the cash is used in the interim to buy other assets so you're not betting against your own positions - selling those other assets for the liquid cash to cover your short positions is why basically the entire market that wasn't GME went red in January of last year right as GME spiked) just before that buy pressure would start hitting and drive the price up.
GameStop going bankrupt any time soon - especially within the next few months - is quite simply not feasible given the company's net positive assets and minimal debts, without significantly greater losses than they are incurring (during an internal restructuring and market pivot, but that's not important to the basic math of their current solvency). The best some analysts (I think it was mainly yahoo finance) could do a few months ago was theorize a valuation for the company that was
less than half of the liquid cash it had on hand at the time. In other words, the only way to make it seem like their bankruptcy was imminent was pretending every dollar held by GameStop is worth 50 cents - which, ironically, even if somehow true, would still have left GameStop net-positive in wealth terms (a.k.a. still not bankrupt).
russ_watters said:
it's the wallstreetbets crowd who is leading the manipulation right now
Well, r/wallstreetbets had essentially banned discussion of GME following a sudden and large amount of moderator turnover in late winter last year - there have been multiple exoduses (exodi?) of users to other forums/subreddits. Believe it or not r/wallstreetbets actually has a history of moderators being "bought off" by outside actors that predates the whole GME saga. R/wallstreetbets itself has not been a primary forum for discussion of GME trends and theses for months now, but it is the only forum that is regularly mentioned in the media in the context of GME. The culture of r/wallstreetbets and the forums to which GME discussion migrated are notably different.
russ_watters said:
Expensive ride, and I'm not sure they will believe it was worth it when the ride ends.
They paid an admission price. Key tense: past. It costs nothing more to ride the ride - which they have already been doing for months - just to buy more tickets. Oh, and GameStop's transfer agent, Computershare, allows you to set an investment amount in cash and they will register in your name whatever shares or portions of a share that investment amount (minus some fees) is worth when they batch purchase other aggregated share orders. What this means is that the minimum expense of having at least some "skin" in the ride/game is not actually the cost of a GME share - it's the minimum investment amount in Computershare's transfer structure with GameStop, which for a one-time investment is, IIRC, $25, or $50 if you have no account with them. The fees are taken from those amounts at purchase, not added to them - even with fees, that minimum amount is all you'd need to pay.
Given that the ticket itself is the asset (i.e. the stock), the asset holders only incur a permanent reduction to their liquid net worth (i.e. a loss of liquid funds) if they each decide to sell at a loss.
russ_watters said:
many/most don't really believe it's worth the price and that's not why they are playing the game.
Do you have the market data to back that declaration of majority motive/belief up?
russ_watters said:
Microsoft is buying Activision and that's likely to be very bad for Gamestop:
I wouldn't call "two companies you already have extensive contractual relationships with becoming one company" a "very bad" thing - it may allow Microsoft to have more leverage in individual contract negotiations... but buying Activision means they also inherit the motives to sell with GameStop that Activision had before, as well as likely
directly inheriting many of Activision's existing contractual obligations. They have more to offer GameStop, but at the same time have more that they can benefit from selling through GameStop by virtue of having more to sell.
That yahoo finance piece is absolutely bizarrely reasoned - it's like saying a grocery store will be severely harmed if, where before it was buying two different kinds of bread from two sellers, those two sellers are now one company and it now buys both kinds of bread from that company. The newly merged bread company still wants to sell its bread - and it already knows, twice over, that the grocer is a reliable way to do that. This might be less important in a digital system or with nonperishable goods... unless you also sell digital bread and now know that the grocer itself is heavily investing in building new infrastructure to sell nonperishable digital bread in an emerging new kind of digital market, which allows you to outsource the new digital storefront and sale infrastructure construction/maintenance costs to an already proven reliable business partner and potentially merge your digital and physical sales into the same storefront system, all while letting your business partner handle most of the risks associated with the early stages of a new kind of market. Yes, those risks are potentially detrimental to GameStop... but they are risks that were actively being taken by GameStop already, regardless of Microsoft's acquisition of Activision.
It also evidently hasn't been enough of a "material reason" to maintain the "current drop" momentum, which thus far today as market nears close has been basically sideways overall up until basically the last minute (though to be fair, market makers and brokers historically like to do their big selling moves and therefore potential negative price manipulation right at the end of the trading day, because overnight trading is something the public generally cannot access but they can). See:
https://arxiv.org/pdf/2201.00223.pdf
EDIT as of 18:00 EST (original post was at 15:37) - Yep, exactly as I suspected, the price went from ~106.00 at around 15:20 EST down to 100.00 in basically the last 30 minutes before regular trading hours ended + some after hours selling. Which means the net negative price movement was basically confined to a period of time during which no non-market makers or non-brokers would have been able to react with any buy pressure, which tracks rather directly with the central thesis of the arxiv paper I linked, alongside a pending period of significant exposure to squeeze risk through FTD covering to heavily incentivize pushing the price as low as possible - even if it increases future short exposure -
today. The goal may be to try and trigger any stop losses set at the nice round number of 100.00, but only tomorrow (hence the actual decline to 100.00 being during after hours and therefore not able to trigger those stop loss sells until tomorrow in pre-market at the earliest) so the price goes down before market open tomorrow just before the usual "right as market opens" buys the big players tend to do to give them the minimum possible price just before shorts from December start needing to be closed.
Oh, and as an aside, you may want to take yahoo finance analysis with a bit of a more skeptical eye - earlier this month they reported that GME had declined sharply "because of an NFT marketplace announcement by GameStop being underwhelming," but there are two issues with this:
- GME's price when that was published had not declined - it had been stable; the actual decline in GME's price that day didn't happen until after the article talking about the decline was published, and was largely attributable to an enormous number of new short or bearish options positions being opened - in other words, not the fundamentals of the stock, as the analysis had implied, but very poorly veiled market manipulation.
- GameStop never actually made any such announcement. Yahoo finance was citing a mostly speculative Wall Street Journal piece that had been published the day before... and had done basically nothing to the price (see "it had been stable" from 1.).
Fundamentals are still fundamentals.
