Dumb Money review: What happened with the GameStop short squeeze, Keith Gill, and Melvin Capital

In a July 27, 2020, YouTube video posted to his channel, Gill said, “Some people won’t even tune into the stream right now when they hear I’m bullish on GameStop, at the current price point it’s traded at about four bucks right now.” Cohen is the founder and former chief executive of the e-commerce platform Chewy and one of the largest shareholders in GameStop through the private firm he operates, RC Ventures. The stock market drama has been called a “David and Goliath” battle. The demand raised its share price massively, which nobody saw coming, and everyone who had banked on it dropping in value had to buy their shares back.

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Many were betting on GameStop’s stock to fall how to trade bull and bear flag patterns by “shorting” it. The struggling video game retailer’s stock has been making stupefying moves this month, wild enough to raise concerns from professional investors on Wall Street to the hallways of regulators and the White House in Washington. The normie GameStop investors who recognized the opportunity for a short squeeze were right — the stock was over-shorted, they saw their chance, and they seized it. The episode took out Melvin Capital — even after getting extra money injected, the hedge fund eventually went under. From how Animal Crossing taught gamers how to pick stocks to the beach bum who made millions betting on the short squeeze happening to what a short squeeze is, The Ringer has the GameStop stock saga covered from all angles.

1. Battles between investors that have different views of a company’s value are common but this is perhaps the first time that ordinary investors have had the clout to cause a large fund such hefty losses.
2. When they buy stocks “on margin,” they’re using borrowed money, which can supercharge their gains and losses.
3. The upward spiral was halted in the short-term by some more than dubious moves, but the market has been passing judgment on a daily basis.
4. The only thing GameStop has delivered on is cost-cutting measures, including progressively reducing its workforce to less than half of the 23,000 employees it had in 2017.

During after hours and pre-market trading that weekend, the GameStop continued to climb. Acting in unison they pushed up the share price to astronomical levels causing massive losses for short-sellers. Now the battleground has shifted to other shares that have been bet against by hedge funds including BlackBerry, cinema chain AMC and American Airlines.

After all, similar, although perhaps less blatant, conflicts of interest are rife within investment banks whose analysts pump out research on assets while their traders buy and sell them. Did WallStreetBets really game the system any more than some on the real-life Wall Street have done? This is a positive development for those who are financially savvy enough to trade for themselves but it also opens up others to making risky bets that they don’t understand. There are always people willing to take advantage of others’ naivety, as countless banking and investment scandals demonstrate. GameStop’s’s shares hit a low of $2.57 last year before rising to $18.84 by 31 December after a notable hedge fund decided to back the company. All of this was unremarkable until users on a Reddit forum called “WallStreetBets” decided to buy into GameStop shares (or options to buy them), initially because they thought it was undervalued, then to send a message to the short-sellers.

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In this case, however, the short position no longer exists, Pachter said. Meanwhile, he added, the company faces a difficult business environment as it weathers a transition toward downloadable games and away from its specialty of in-store purchases. Analysts said GameStop may continue to rise in the short term but they noted differences in the trade this time around and sounded alarm about the risk of sustaining losses if others unload the stock first.

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But huge numbers of people in the wallstreetbets Reddit forum swapped tips and bought shares in GameStop. With fewer people out shopping due to the pandemic and most games being sold online, things weren’t looking great for the company. As for the diehard GameStop investors who kept holding the stock after turkish lira to japanese yen the early 2021 frenzy, they are another story. Despite high hopes for a pivot under the stewardship of Ryan Cohen, the co-founder of the pet e-commerce company Chewy who has inspired much of the GameStop crowd’s bullishness, the business isn’t exactly hitting home runs. Cohen’s turnaround plan hasn’t really materialized, and the company has gone through multiple leadership changes.

GameStop timeline: A closer look at the saga that upended Wall Street

Other heavily shorted stocks have been seeing a surge of interest recently as investors look for the next GameStop. American Airlines, BlackBerry and other formerly downtrodden stocks have had extreme swings in price this week. But that GameStop is still operating and putting up a fight to ensure its future viability is already more than many expected three years ago. Other meme stocks that experienced speculative movements, such as Bed, Bath & Beyond, have succumbed to bankruptcy and ruined their shareholders.

It’s perfectly legal and many experts argue it is an important way to allow markets to determine the “true” price of any asset. It’s also a method of speculation that can increase volatility and reduce stability. In the end, there may be no way to prevent people from pushing a stock too high and potentially burning themselves.

After a drama-filled week that gripped the nation, the entertainment industry outlet Deadline reported that the saga was already being turned into a movie that was being produced by Tyler and Cameron Winklevoss (of “The Social Network” fame). “In this sort of Wall Street bets culture, people take screenshots of how much money they’ve made or lost to kind of show off,” he said. “And as they sort of advertised that, people started piling into the trade and the momentum built.” Gill publicly touted GameStop stock long before it caught tickmill review and rating https the eyes of Wall Street and the world.