'Dumb Money' Loses $13.1B in Latest GameStop Stock Mania(investors.com)
investors.com
'Dumb Money' Loses $13.1B in Latest GameStop Stock Mania
https://www.investors.com/etfs-and-funds/sectors/sp500-dumb-money-loses-billion-in-latest-gamestop-stock-mania/
21 comments
Quite interesting indeed. From Gamestop's recent Form 10-K (Q4 2023) SEC filing:
> "As of March 20, 2024 [...] approximately 75.3 million shares of our Class A common stock were held by registered holders with our transfer agent (or approximately 25% of our outstanding shares)."
I've never seen anything like this. It seems absolutely unprecedented.
Recently Ian Carroll posted an overview [2] on X where he attempts to untangle the mess of the chaos surrounding Gamestop and its stock. I'm not going to pretend to understand the (dys?)function of our financial markets or everything that he shared, but my eyes are peeled.
[1] https://news.gamestop.com/node/20376/html
[2] https://x.com/Cancelcloco/status/1790524969623175629
> "As of March 20, 2024 [...] approximately 75.3 million shares of our Class A common stock were held by registered holders with our transfer agent (or approximately 25% of our outstanding shares)."
I've never seen anything like this. It seems absolutely unprecedented.
Recently Ian Carroll posted an overview [2] on X where he attempts to untangle the mess of the chaos surrounding Gamestop and its stock. I'm not going to pretend to understand the (dys?)function of our financial markets or everything that he shared, but my eyes are peeled.
[1] https://news.gamestop.com/node/20376/html
[2] https://x.com/Cancelcloco/status/1790524969623175629
> Recently Ian Carroll posted an overview [2] on X where he attempts to untangle the mess of the chaos surrounding Gamestop and its stock. I'm not going to pretend to understand the (dys?)function of our financial markets or everything that he shared, but my eyes are peeled.
So just so you're aware... this is not a good source for financial understanding. This is the financial equivalent of someone who struggled with high school physics going to the Wikipedia article on quantum chromodynamics to then turn around and explain it to you.
Like, the explanation of derivatives is wrong. Leverage has nothing to do with derivatives; derivatives are essentially trades that are trading on the value of another asset rather than the asset itself.
The short answer as to what has happened is GameStop is a video game retailer that hasn't been managing the trend to digital distribution. For $REASONS, the stock experienced a massive bump in 2021. The rapid inflation caused Robinhood (among a few other apps, but mostly Robinhood) to suspend the ability to buy shares, for reasons beyond proponents' ken [1]... which caused it to be interpreted as some financial conspiracy to keep the hedge funds alive at the expense of regular people. When the resulting short squeeze proved less calamitous than expected [2], the people who bought high have turned to increasing amounts of copium to motivate why the short squeeze hasn't happened yet, and turned to anything they can find that might enable them to trigger the "real" short squeeze (which at this point is no longer a mere short squeeze but a total financial apocalypse).
[1] The simplest explanation (though not entirely accurate, it is sufficient to get the reasons why across) is that Robinhood was borrowing money to buy the stocks on users' behalf, and the counterparties effectively did a margin call on Robinhood.
[2] One hedge fund failed.
So just so you're aware... this is not a good source for financial understanding. This is the financial equivalent of someone who struggled with high school physics going to the Wikipedia article on quantum chromodynamics to then turn around and explain it to you.
Like, the explanation of derivatives is wrong. Leverage has nothing to do with derivatives; derivatives are essentially trades that are trading on the value of another asset rather than the asset itself.
The short answer as to what has happened is GameStop is a video game retailer that hasn't been managing the trend to digital distribution. For $REASONS, the stock experienced a massive bump in 2021. The rapid inflation caused Robinhood (among a few other apps, but mostly Robinhood) to suspend the ability to buy shares, for reasons beyond proponents' ken [1]... which caused it to be interpreted as some financial conspiracy to keep the hedge funds alive at the expense of regular people. When the resulting short squeeze proved less calamitous than expected [2], the people who bought high have turned to increasing amounts of copium to motivate why the short squeeze hasn't happened yet, and turned to anything they can find that might enable them to trigger the "real" short squeeze (which at this point is no longer a mere short squeeze but a total financial apocalypse).
[1] The simplest explanation (though not entirely accurate, it is sufficient to get the reasons why across) is that Robinhood was borrowing money to buy the stocks on users' behalf, and the counterparties effectively did a margin call on Robinhood.
[2] One hedge fund failed.
held by registered holders with our transfer agent
what does this mean? what is the significance?
what does this mean? what is the significance?
Short answer: the people doing this think it's going to fuck short sellers over.
The longer answer involves trying to make a coherent story by people who are financially illiterate trying to read moderately advanced modern finance textbooks to explain why they were unsuccessful in fleecing Big Bad Finance™ by somehow finding a way to trigger financial apocalypse. The more you try to understand it, the less sense it is going to make.
The longer answer involves trying to make a coherent story by people who are financially illiterate trying to read moderately advanced modern finance textbooks to explain why they were unsuccessful in fleecing Big Bad Finance™ by somehow finding a way to trigger financial apocalypse. The more you try to understand it, the less sense it is going to make.
I'd rather say they are trying to prove some things to the general public.
People new to the stock market assume that when they buy shares through their broker, they own the share. They also often buy shares in hopes that the stock price will go up.
However, more often than not, a broker will hand out an IOU when you "buy" a share, and then proceed to rent out the share to short sellers. You buy a share in hopes that the price will go up, but that share is then used for the opposite.
Buying a share through the company's registered custodian prevents this.
They also want to show the general public that even when 100% of a company's shares are bought, owned and locked down - short sellers are still able to generate phantom shares to move the stock price down.
People new to the stock market assume that when they buy shares through their broker, they own the share. They also often buy shares in hopes that the stock price will go up.
However, more often than not, a broker will hand out an IOU when you "buy" a share, and then proceed to rent out the share to short sellers. You buy a share in hopes that the price will go up, but that share is then used for the opposite.
Buying a share through the company's registered custodian prevents this.
They also want to show the general public that even when 100% of a company's shares are bought, owned and locked down - short sellers are still able to generate phantom shares to move the stock price down.
> However, more often than not, a broker will hand out an IOU when you "buy" a share, and then proceed to rent out the share to short sellers
There are specific stock lending programs, but can you back up the claim that brokers are silently lending shares from the portfolio of people who did not opt in to such a program?
There are specific stock lending programs, but can you back up the claim that brokers are silently lending shares from the portfolio of people who did not opt in to such a program?
The actual purpose of DRS shares is to make it psychologically more difficult for low-information retail traders to sell shares.
Good question. What that quote from the recent filing is describing is the result of investors using the "Direct Registration System" (DRS), which is a system for book-entry ownership [1][2].
Given the example of risk HN user /deified/ shared regarding suspicions of brokers clandestinely distributing IOUs without investor knowledge where they should, in fact, be purchasing real shares, DRS offers the ability to move shares from one's broker to the company's transfer agent.
In effect, what DRS seemingly provides is a far more robust chain of trust and custody, as well as a more concrete level of assurance that shares in one's account are, in fact, real (and not IOUs).
In this case, the 10-K filing provides direct evidence that investors are consistently moving their Gamestop shares out of their respective brokers, to Gamestop's transfer agent, a company called Computershare (or purchasing shares directly via Computershare).
A conclusion one could possibly draw from this is that hundreds of thousands of Gamestop investors have collectively agreed that they can no longer trust their brokers, they are fed up with the true reality [and limitations] of "beneficial ownership", and are instead registering their Gamestop shares with the transfer agent (Computershare). All to the tune now of 25% of the total outstanding shares. As far as I'm aware, behavior of this magnitude has never before occurred.
Should that percentage continue to climb, it will be interesting to see what effect (if any) it will have on Gamestop's share price, assuming true supply and demand and real price discovery is still a fundamental part of how our markets function.
Ian released a video [3] this past December 2023, related to this topic.
[1] https://www.computershare.com/ca/en/insync/summer-2016/about...
[2] https://content-assets.computershare.com/eh96rkuu9740/630fe9...
[3] https://x.com/Cancelcloco/status/1740515711775346762
Given the example of risk HN user /deified/ shared regarding suspicions of brokers clandestinely distributing IOUs without investor knowledge where they should, in fact, be purchasing real shares, DRS offers the ability to move shares from one's broker to the company's transfer agent.
In effect, what DRS seemingly provides is a far more robust chain of trust and custody, as well as a more concrete level of assurance that shares in one's account are, in fact, real (and not IOUs).
In this case, the 10-K filing provides direct evidence that investors are consistently moving their Gamestop shares out of their respective brokers, to Gamestop's transfer agent, a company called Computershare (or purchasing shares directly via Computershare).
A conclusion one could possibly draw from this is that hundreds of thousands of Gamestop investors have collectively agreed that they can no longer trust their brokers, they are fed up with the true reality [and limitations] of "beneficial ownership", and are instead registering their Gamestop shares with the transfer agent (Computershare). All to the tune now of 25% of the total outstanding shares. As far as I'm aware, behavior of this magnitude has never before occurred.
Should that percentage continue to climb, it will be interesting to see what effect (if any) it will have on Gamestop's share price, assuming true supply and demand and real price discovery is still a fundamental part of how our markets function.
Ian released a video [3] this past December 2023, related to this topic.
[1] https://www.computershare.com/ca/en/insync/summer-2016/about...
[2] https://content-assets.computershare.com/eh96rkuu9740/630fe9...
[3] https://x.com/Cancelcloco/status/1740515711775346762
If by “meme stock” you mean “a stock that is bought for fun instead of financial or political gain”, then IMO the article is right on. That’s basically the textbook definition of maniacal/irrational behavior - like a poker strategy unrelated to the cards dealt.
The thing about poker strategies unrelated to the cards dealt is that they tend to be short lived, and aren't really all that interesting from an internal poker perspective.
Trading stocks for teh memez is a lot like streaking at a football game. It won't last long, no one interested in football cares, and afterwards, if you tried to talk about your 'football career', everyone would laugh.
Trading stocks for teh memez is a lot like streaking at a football game. It won't last long, no one interested in football cares, and afterwards, if you tried to talk about your 'football career', everyone would laugh.
Meme stocks are not a strategy to make money. It only looks insane if you cannot imagine that people trade for other reasons than to make money. But these guys have other goals — proving points, protesting short-selling, speculating for fun, and so on.
It’s all good. Not everyone has a car to drive from point A to B, some people drive cars for fun. Not everyone plays tennis to compete on the world stage. Same with securities. People just have fun.
It’s all good. Not everyone has a car to drive from point A to B, some people drive cars for fun. Not everyone plays tennis to compete on the world stage. Same with securities. People just have fun.
To “say the quiet part out loud” and overplay my point for clarity (no offense intended, thanks for the clear response!): I think people are being tricked into thinking they’re having fun, but in the long run they’re harming themselves and falling prey to a variety of opportunists along the way, hedge funds and diamond hands alike. I think I know better than they do whether they’re truly having fun! Like judging the people who spend all day at the slots.
Good, long video covering the whole GameStop stock phenomenon (among other things): https://www.youtube.com/watch?v=5pYeoZaoWrA
Even if you think you know the topic, if you haven't seen the video, you probably don't know all of the topic.
The TL;DR is that the people involved have gotten to the point where they believe that a) the short squeeze hasn't happened yet, b) when it happens, it will take down the entire financial system, and c) everyone who holds Gamestop stock at the time will become fabulously wealthy.
The TL;DR is that the people involved have gotten to the point where they believe that a) the short squeeze hasn't happened yet, b) when it happens, it will take down the entire financial system, and c) everyone who holds Gamestop stock at the time will become fabulously wealthy.
Meme stock == P/E > 250
There are ~100 major publicly-traded stocks lacking financials in this bucket.
https://finviz.com/screener.ashx?v=111&f=fa_pe_o50&ft=2&o=-p...
There are ~100 major publicly-traded stocks lacking financials in this bucket.
https://finviz.com/screener.ashx?v=111&f=fa_pe_o50&ft=2&o=-p...
I think it's kind of sad. Roaring Kitty started off doing pretty deep analysis of Gamestop. He was an early contrarian who confidently and politely disputed critics on r/wallstreetbets, bringing data to show the company was undervalued. Now it seems he's just decided to be one of those guys who tweets a meme, sets off a gambling frenzy, and (presumably) makes bank. It's no different from a pyramid scheme.
Roaring Kitty posted. He still holds the shares. Actually he holds 5 times more than he did 4 years ago
https://www.reddit.com/r/Superstonk/comments/1d6r5vp/gme_yol...
https://www.reddit.com/r/Superstonk/comments/1d6r5vp/gme_yol...
The problem is they didn't replace undervaluing with conservative value investing behavior because the composite behavior of a mob is tulip bulb crises. Their sentiment was excessively amplified by social media to Jim Cramer-proportions.
wish I had more dumb money so I can short tesla
[deleted]
GME looks like it was probably pumped and dumped (intentionally or not), but it is up 107% month on month currently. So the report could easily be “investors double their money”. It’s meaningless.
The article also doesn't mention the actual reasons people invest into GME. It’s a meme stock. People also claim to buy it in protest of aggressive short-selling by large funds that ruins small businesses. I don’t know if anyone really expects to make money on it beyond the potential pump and dump ride-along.
The link is very biased and sensationalist. What’s going on with GME is quite interesting, in contrast.