GameStop surges 78% in Massive “Retail-Rebellion” — Andrew Left Calls on SEC and FBI
On Friday Game Stop Stock(GME) surged 78% as members of R/Wallstreetbets initiated a short squeeze on institutions with open shorts — leading to a trading halt on the stock. This article isn’t being written because GameStop surged, but because of how and why it surged. Retail investors are beginning to employ the same organized and cooperative tactics as the hedgefunds — and this growing development scares the $#!t out of institutional market manipulators.
“GameStop is the most-shorted stock in the market, CNBC said, citing FactSet. More than 138 percent of its shares are sold short — making it a prime target for a short squeeze.”
“GameStop’s Reddit-related surge triggered a circuit breaker stoppage when it rose 69 percent (nice) on Friday around 12:45PM ET.”
In August, the CEO of Chewy Ryan Cohen had accumulated a large stake in the company, roughly 10%, and began advocating for the company to focus on building its ecommerce value. The billionaire announced this accumulation in a November news letter.
Chewy was sold to PetSmart for $3.35 billion in 2017. As ArsTechnica reported, “Since that sale, Cohen has tended to invest his billions in big, safe stocks like Apple and Wells Fargo, so his major investment in the much riskier GameStop attracted notice.”
This built retail momentum in the stock, and it began to rapidly climb from its relative low of just $5 in September.
“GameStop’s challenges stem from internal intransigence and an unwillingness to rapidly embrace the digital economy” — Ryan Cohen in a Novemeber SEC Filing
Just two weeks ago, Cohen and 2 former chewy execs were brought on to the board of directors for Gamestop. At the time, the stock was sitting just at 20 dollars, having climbed 300% from the price in August, and even more from its $2.80 low in 2020. Investors responded positively, driving the price further up.
Being that this was the most shorted stock on the market, short-sellers with open short positions(mostly institutions) had to continue buying the stock at higher prices to cover their shorts, assisting in the upwards rise.
“Demand started with some Robinhood-type retail investors, but once it started going up, then you had shorts that were like ‘Oh shoot.’ And the shorts were getting killed, so they started covering. And that was a feeding frenzy. Light supply, heavy demand… so the stock’s just getting ripped up… I’ve never seen anything like this in my life.” — Wedbush Morgan analyst Michael Pachter
Then the pot began to boil over as institutional shorters were being rag-dolled by retail investors in an unusual reversal of traditional roles. Andrew Left of Citrin Research tweeted on Tuesday:
Left would go on to claim that this livestream was interrupted by hackers
Citrin Research would go on to make a 2nd account on Friday, and tweet out an announcement that they will “Be no longer commenting on Gamestop” because of “the angry mob who owns this stock that has spent the past 48 hours committing multiple crimes that I will be turning over to the FBI, SEC, and other governmental agencies”.
Wired reported on the alleged Doxxing and crimes, saying that,
WallStreetBets moderator Bawse1 says that he doesn’t know if those things happened, “and if they did, it’s not something we condone or promoted.” At least two posts on the subreddit refer to an alleged doxing. WIRED has not confirmed whether doxing happened or if it was through WallStreetBets channels. Left did not respond to WIRED’s request for comment. Twitter told WIRED it locked his account as a precaution.
The R/wallstreetbets moderator would be further quoted to say,
“It was a meme stock that really blew up. The massive short contributed more toward the meme stock.”
“GameStop seemed so utterly doomed that the current situation was actually sort of funny to the subreddit’s denizens. Banded together, WallStreetBets members bought in big enough to move the stock.”
The subreddit that describes itself as “like 4chan found a Bloomberg terminal” is popular among retail investors that have caught on to the secret of institutional players. There is strength in numbers. In money pools. When the small-guy retail investors align strategies, organize their resources, and employ financial tools cooperatively the same way hedge funds do — it evens the playing field.
Timothy Collins of The Street wrote about how this whole situation reminded him of A Bug’s life.
“For as long as the ants (protagonists) can remember, they collected food for the grasshoppers (antagonists). Each year, the grasshoppers fly in, eat the food, then leave. If the ants don’t do it, the grasshoppers tell them they will be punished. Eventually, the ants realize they significantly outnumber the grasshoppers. If they band together, they can take down the grasshoppers.
Take that same idea and replace ants with retail traders (like us) and grasshoppers with institutions and market makers.”
The reality is that this is not far from the truth, and that retail investors are often at the losing end of market manipulation being done by hedgefunds and institutions. Rarely do retail investors win, and institutions lose. Retail investors are successfully herded into sub-par financial decisions, often by financial institutions that are at the same time working against them.
“There’s been an awakening. A large group of retail traders have realized if they work together, using market tools such as out-of-the-money call options or low-float stocks, they can overpower any institution or short-seller in the world, outside of the Fed, of course.” — Timothy Collins
While Collins rooted for the economically enslaved under-dog, he made sure to condemn the hackers and malicious use of technology against individuals expressing their opinion. After claiming to know of another bearish author suffering cyber attacks, he states, “Using the tools of the system, basically supply and demand, options, etc. makes sense. Crossing into these kind of activities makes these folks no better than calls against people for insider trading, in my view.”
