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It's currently $250ish after-hours...
I didn't realize that the Gamestop hysteria originated with Michael Burry and his hedge fund several months ago.
https://www.forbes.com/sites/antoin...natural-insane-and-dangerous/?sh=7955bddc303b
The Hedge Fund Genius Who Started GameStop’s 4,800% Rally Now Calls It “Unnatural, Insane, And Dangerous”
In April, Dr. Michael Burry, the hedge fund investor who made millions shorting subprime mortgages during the 2008 crisis and was dramatized by Christian Bale in “The Big Short,” made a bold play at the depths of the Coronavirus pandemic.
Burry’s hedge fund Scion Asset Management disclosed it bought 5.3% of ailing video game retailer GameStop at between $2 and $4.2 a share, spending about $15 million in total. Burry’s play was to urge GameStop to use its cash and buy back its stock, potentially retiring about half of its shares outstanding. In a sharply worded letter to GameStop’s board of directors, Burry called for the company to exhaust its $300 million buyback authorization by repurchasing stock. At the time of his letter GameStop’s entire market cap was just $300 million.
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Now, GameStop’s hedge fund bull Michael Burry, arguably the person who instigated the current circumstances with his massive buyback call, says the squeeze is “unnatural, insane and dangerous.” In a tweet, Burry said there should be legal and regulatory repercussions from the surge.
https://www.forbes.com/sites/antoin...natural-insane-and-dangerous/?sh=7955bddc303b
The Hedge Fund Genius Who Started GameStop’s 4,800% Rally Now Calls It “Unnatural, Insane, And Dangerous”
In April, Dr. Michael Burry, the hedge fund investor who made millions shorting subprime mortgages during the 2008 crisis and was dramatized by Christian Bale in “The Big Short,” made a bold play at the depths of the Coronavirus pandemic.
Burry’s hedge fund Scion Asset Management disclosed it bought 5.3% of ailing video game retailer GameStop at between $2 and $4.2 a share, spending about $15 million in total. Burry’s play was to urge GameStop to use its cash and buy back its stock, potentially retiring about half of its shares outstanding. In a sharply worded letter to GameStop’s board of directors, Burry called for the company to exhaust its $300 million buyback authorization by repurchasing stock. At the time of his letter GameStop’s entire market cap was just $300 million.
...
Now, GameStop’s hedge fund bull Michael Burry, arguably the person who instigated the current circumstances with his massive buyback call, says the squeeze is “unnatural, insane and dangerous.” In a tweet, Burry said there should be legal and regulatory repercussions from the surge.
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I hope for his sake he made some money from it to help cover his TLSA short.
And, why is it fair game for hedge funds to short 120% of the float of a company to try to drive it to bankruptcy and he is fine with it but when a bunch of retail punks get together and kill the hedge funds position he thinks suddenly big government should step in to save the moneyed class? Umm, no.
I have no position and won't but I think this is awesome.
And, why is it fair game for hedge funds to short 120% of the float of a company to try to drive it to bankruptcy and he is fine with it but when a bunch of retail punks get together and kill the hedge funds position he thinks suddenly big government should step in to save the moneyed class? Umm, no.
I have no position and won't but I think this is awesome.
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Shorting a stock doesn't drive a company to bankruptcy. They've already sold that stock, so the only people getting hurt are the shareholders. Plus they can do reverse splits to keep their shares above $1 to meet minimum requirements to stay listed on the exchanges.
The legality of what we're seeing out of WSB is highly questionable. Pump and dumps are illegal, because they're considered market manipulation, but the definition of market manipulation is somewhat of a gray area. Check out this article. It explains the situation a lot better than I could. Cliffnotes version: even the experts don't know if what we're seeing right now violates SEC rules.
Michael Burry predicted the subprime mortgage crisis, but he was early. My guess is the same thing will happen with Tesla. Elon Musk got in trouble for saying that he was considering taking TSLA private at $420 per share. He later said that it was overvalued at $700 per share. After a 5:1 split, TSLA's price is essentially 10X the amount their CEO believes is a fair price. The retail crowd has inflated this bubble a lot further than I thought it would go. Bubbles don't tend to end well, but who knows what will happen. Like I said earlier, we're in uncharted territory. I'm just going to sit back and enjoy the show.
The legality of what we're seeing out of WSB is highly questionable. Pump and dumps are illegal, because they're considered market manipulation, but the definition of market manipulation is somewhat of a gray area. Check out this article. It explains the situation a lot better than I could. Cliffnotes version: even the experts don't know if what we're seeing right now violates SEC rules.
Michael Burry predicted the subprime mortgage crisis, but he was early. My guess is the same thing will happen with Tesla. Elon Musk got in trouble for saying that he was considering taking TSLA private at $420 per share. He later said that it was overvalued at $700 per share. After a 5:1 split, TSLA's price is essentially 10X the amount their CEO believes is a fair price. The retail crowd has inflated this bubble a lot further than I thought it would go. Bubbles don't tend to end well, but who knows what will happen. Like I said earlier, we're in uncharted territory. I'm just going to sit back and enjoy the show.
We will just disagree on the effects of intense shorting on the ability of a company to obtain capital and recover.
Have you read Wallstreetbets? This is not a pump and dump at all. I have and if what has been said is the level that meets "market manipulation" then nearly every investing website that makes a recommendation and has a comment section has broken the same rule. "Market manipulation" should not be decided based on the success of what was said.
What Musk believed was a fair price, not believes. Musk said that two years ago. The Fed has completely changed the markets since then. The Model 3 was an unknown then and is now a resounding success. A valuation estimate from then has no bearing in today's market.
This isn't the retail crowd, this is the Fed and the government. What I agree with is that I have no idea what will happen. In some ways I think we are in a bubble and in others I think we are beginning a huge bull run. The problem is what I have always looked at to make those considerations simply do not work now and I don't have the time/knowledge to try to figure it out if it is even possible.
Have you read Wallstreetbets? This is not a pump and dump at all. I have and if what has been said is the level that meets "market manipulation" then nearly every investing website that makes a recommendation and has a comment section has broken the same rule. "Market manipulation" should not be decided based on the success of what was said.
What Musk believed was a fair price, not believes. Musk said that two years ago. The Fed has completely changed the markets since then. The Model 3 was an unknown then and is now a resounding success. A valuation estimate from then has no bearing in today's market.
This isn't the retail crowd, this is the Fed and the government. What I agree with is that I have no idea what will happen. In some ways I think we are in a bubble and in others I think we are beginning a huge bull run. The problem is what I have always looked at to make those considerations simply do not work now and I don't have the time/knowledge to try to figure it out if it is even possible.
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It's true that a depressed stock price will hinder a company from raising capital through a secondary offering, but ultimately companies succeed or fail on their own. They can still be perfectly viable if their stock value goes to zero and they get delisted.
I have been to WSB before, but just for the entertainment. They're self described motto is "like 4chan found a Bloomberg terminal." Their community revels in the fact that they're degenerate gamblers. I tend to avoid investing like this. Their site can definitely be entertaining though.
Orchestrated short squeezed are considered market manipulation. The SEC has prosecuted this behavior before. I don't think that anyone on WSB really believes that GME is worth $300 per share. They're just trying to pump the price up to burn hedge funds that are short. No one cares when someone pumps a microcap from $1 to $10, but a lot of people are going to care about this. It will be interesting to see what the SEC does about it.
The Fed & the government are the reason the market has bounced back so strong, but that doesn't explain what we're seeing from the retail crowd. Bitcoin, GME, TSLA, NIO, etc. are all securities that retail money is pouring into regardless of fundamentals. Some are up 500-1000% over the past 12 months. Bubbles like this don't tend to end well. I actually really like Elon Musk & Tesla in the long term, but I think their current valuation is insane considering the fact that they're barely profitable.
I have been to WSB before, but just for the entertainment. They're self described motto is "like 4chan found a Bloomberg terminal." Their community revels in the fact that they're degenerate gamblers. I tend to avoid investing like this. Their site can definitely be entertaining though.
Orchestrated short squeezed are considered market manipulation. The SEC has prosecuted this behavior before. I don't think that anyone on WSB really believes that GME is worth $300 per share. They're just trying to pump the price up to burn hedge funds that are short. No one cares when someone pumps a microcap from $1 to $10, but a lot of people are going to care about this. It will be interesting to see what the SEC does about it.
The Fed & the government are the reason the market has bounced back so strong, but that doesn't explain what we're seeing from the retail crowd. Bitcoin, GME, TSLA, NIO, etc. are all securities that retail money is pouring into regardless of fundamentals. Some are up 500-1000% over the past 12 months. Bubbles like this don't tend to end well. I actually really like Elon Musk & Tesla in the long term, but I think their current valuation is insane considering the fact that they're barely profitable.
Shorting a stock can absolutely cause bankruptcy. When buying a stock the maximum risk is your initial investment. There is no limit to the amount you can lose when you short a stock.
With GameStop’s incredible growth over the last month, investors shorting the stock are being put through a massive squeeze right now. Granted institutional investors will probably keep their short sale “open” right now and will not see an immediate impact, but that also means their risk for additional losses climbs.
With GameStop’s incredible growth over the last month, investors shorting the stock are being put through a massive squeeze right now. Granted institutional investors will probably keep their short sale “open” right now and will not see an immediate impact, but that also means their risk for additional losses climbs.
I meant that it can't cause bankruptcy for the company being shorted. I wouldn't be surprised to see several funds go under over this. Everything is clear in hindsight, but I have to wonder how funds took such large short positions in GME. No one could've envisioned this, but there's still a lot of risk involved in shorting a microcap stock.
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I don't claim to know what the true value of Gamestop and AMC should be. However, there is no way I would consider purchasing these stocks.
Neither of the stocks controls their own content. And if you don't control content in entertainment then you need to be able to offer an incremental value proposition in delivery. Neither of these companies are the best solution for delivery. Or finally a way to drive enough adjacent revenue. I don't see enough adjacent revenue for either of these companies.
For Gamestop: There are multiple different methods to receive games and gaming accessories than visiting a store.
For AMC : Netflix with OTT content changed the entire landscape. And now the pandemic has shown Universal, HBO, and soon Paramount Studios that it is more profitable and lucrative to open movies via their OTT service rather than a movie studio. That genie is not going to go back in the bottle. This is not to say there will not be movies in studios .... there will be ...but windows will be much smaller and OTT revenue will be much bigger than movie theaters.
Neither of the stocks controls their own content. And if you don't control content in entertainment then you need to be able to offer an incremental value proposition in delivery. Neither of these companies are the best solution for delivery. Or finally a way to drive enough adjacent revenue. I don't see enough adjacent revenue for either of these companies.
For Gamestop: There are multiple different methods to receive games and gaming accessories than visiting a store.
For AMC : Netflix with OTT content changed the entire landscape. And now the pandemic has shown Universal, HBO, and soon Paramount Studios that it is more profitable and lucrative to open movies via their OTT service rather than a movie studio. That genie is not going to go back in the bottle. This is not to say there will not be movies in studios .... there will be ...but windows will be much smaller and OTT revenue will be much bigger than movie theaters.
This is all a bunch of short term maneuvering but long term you make a great point about Gamestop and AMC.
Gamestop is a dying business model and I honestly don't see how they are viable at this point. Gaming at some point is going to be all digital. The gaming model we grew up with is being phased out for digital platforms. My kids like to watch gamers on YouTube (don't get me started) and go for the games they watch. A bunch that are things like Roblox and Among Us currently and those aren't supported by traditional platforms. We will probably see an ebb and flow between traditional and streaming content but console designers are likely to pivot to more streaming, or at least download able platforms which will kill the content companies like Gsmestop can provide.
For AMC, it just costs too much. For Blockbuster movies they can make it work. For example I watched Avengers Endgame the first two days it was released. The first time was a matinee at the local theater. $5 ticket, $13 for all the popcorn and pop I could drink. The 2nd time was at an AMC an hour away (was in town, and had a chance to get the big theater experience). $20 for a matinee ticket and at least $20 for the same refreshments. For someone who likes the theater experience, I'm fine with my local place, but if my only option is the larger more expensive theater, I'll either wait or pay for streaming if it's something the kids would want to watch. $30 for streaming and a couple of bucks for snacks vs. $50-$75 for the experience doesn't pay out for a lot of people. To your point they would either have to develop their own content or become remarkably cheaper to maintain viability.
I think for theaters in general the smaller independent model may be better going forward. For me taking the kids to a local movie may be more expensive than staying at home and streaming, but it's not major theater prices and you are supporting a local business. I think after all of this you will see communities support that type of business way more than they will a corporate model.
Gamestop is a dying business model and I honestly don't see how they are viable at this point. Gaming at some point is going to be all digital. The gaming model we grew up with is being phased out for digital platforms. My kids like to watch gamers on YouTube (don't get me started) and go for the games they watch. A bunch that are things like Roblox and Among Us currently and those aren't supported by traditional platforms. We will probably see an ebb and flow between traditional and streaming content but console designers are likely to pivot to more streaming, or at least download able platforms which will kill the content companies like Gsmestop can provide.
For AMC, it just costs too much. For Blockbuster movies they can make it work. For example I watched Avengers Endgame the first two days it was released. The first time was a matinee at the local theater. $5 ticket, $13 for all the popcorn and pop I could drink. The 2nd time was at an AMC an hour away (was in town, and had a chance to get the big theater experience). $20 for a matinee ticket and at least $20 for the same refreshments. For someone who likes the theater experience, I'm fine with my local place, but if my only option is the larger more expensive theater, I'll either wait or pay for streaming if it's something the kids would want to watch. $30 for streaming and a couple of bucks for snacks vs. $50-$75 for the experience doesn't pay out for a lot of people. To your point they would either have to develop their own content or become remarkably cheaper to maintain viability.
I think for theaters in general the smaller independent model may be better going forward. For me taking the kids to a local movie may be more expensive than staying at home and streaming, but it's not major theater prices and you are supporting a local business. I think after all of this you will see communities support that type of business way more than they will a corporate model.
So one of the cofounders of Chewy bought a stake in Gamestop last fall with the intent of moving it online and competing with Amazon for gaming stuff. That is what really started this as hedge fund managers love to bet against ANYONE that thinks they can take on Amazon and win (they pretty much are right). That is why at the end of 2020, 136% of Gamestops stocks were shorted (yes that means some of them had been shorted more than once). That caught the attention of quite a few including this reddit group which is leading to what you are seeing now. They decided to do a modern version of short squeeze which makes them money and in their minds teaches the fund managers a lesson.
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