UKH

I couldn't find a thread on it, so apologies if I've missed it. But what are your thoughts on the current Reddit 'r/wallstreetbets' situation regarding GME shares atm?

UK platforms (trading 212) have been restricting or stopping purchasing of shares for GME (Game Stop) and Black berry, whislt still allowing holders to sell them. To me this seems like open market manipulation to protect hedge funds who are rapidly heading into the red.

Will it end in some kind of financial reform, or just be swept under the rug?

It is market manipulation. They'll probably get away with it . Robinhood did the same thing in the US.

Shameful how their buddies at CNBC are painting the redditors as the bad guys here who could risk crashing the stock market when they've done nothing wrong, while the hedge funds are openly breaking the law.

If shorting one company not even an entire sector can risk crashing the market it should be illegal to naked short that much stock in the first place.

They've manipulated the market for years with shorts sells and crushed companies into the ground. I hope they go bankrupt.

The whole shorting thing is something I don't understand other than its a way to manipulate the market. What I really don't get is if people are being restricted from buying shares but holders are allowed to sell them, who is buying them? 

So there are two issues as I see it. 

1. A short squeeze on hedge funds taking a leveraged short position - fair enough, nothing to see here.

2. Reddit being used as a platform to launch a pump and dump scheme.

It seems that as a hedge fund is being screwed most people don’t care about point number 2, but loads of small retail traders are about to get burnt. 

I think we’ll see a lot of complaints about people losing 1000s of pounds in the next few weeks.

The restriction only affected retail traders. The hedge funds were able to sell back and forth to lower the price while individuals could not buy and hold.

It's not a pump and dump, they just a bunch of individual investors piling into a stock, they're not publishing false research or pretending there is interest when there isn't or a false narrative about the stock. A short squeeze isn't a pump and dump and they're buying the stock. Not market manipulation under US law.

The mentally of a lot of people seems to be

"I've got nothing to lose and if I'm going down I'll take a hedge fund or two with me"

Yes, but Reddit is full of people talking about joining the (rocket emoji) and the first Reddit Investors are posting updates of their earnings.

The fact there is a hedge fund involved is really irrelevant. It’s just a classic pump and dump.

Instead of Leonardo Dicaprio in the Wolf of Wall Street ringing you up and telling you to invest in Areotyne Industries (“great upside potential, minimal downside risk”) you’ve got a 21st century equivalent; some guy on Reddit telling you how much money you can make and that in the process you’ll be screwing some boomer hedge fund.

Don’t be so naive. Unsophisticated investors are being encouraged to pile in and inflate the price.

The first Reddit investors will make a killing, some of them will break even, most will lose.

The whole sticking it to the hedge fund thing is just cover for the pump and dump. 

I'm not naive, the fact that some of them will sell too late and lose a lot of money is probably true. I still don't think it qualifies as a pump and dump or is illegal in any way. The price increase is caused by the fact that the Hedge Funds have to cover their shorts and not that the company is being hyped. FYI I didn't downvote you.

Regardless of whether the manipulation was intentional or not (I’m sure the SEC will find out and god help them if it was), it has all the same hallmarks as a pump and dump.

A stock that’s essentially worthless (a mall based bricks and mortar game retailer that made massive losses before the pandemic); initial investors promoting the stock (the guy who started the Reddit thread); mugs who piled in and inflated the stocks price (everyone else on Reddit); and false or misleading news (the idea that you’d be sticking it to Wall Street if you invested).

At the end of the day it’s a zero sum game and people stand to lose a lot of money.

Sell 30 April at 142!

https://ibb.co/bNshKGD

Pork belly futures are the way to go. 

I don't get why short selling is legitimate but this kind of short squeezing has led to brokers pulling the plug on buyers acquiring more stock. All that does is give a get out of jail card to the shorters. 30% of the company in question was held by shorters and its a self fulfilling prophesy. The more a company is shorted, the more people sell off stock, the lower the price goes, the more profit the shorter makes and quite often driving decent companies that may have some short term problems into the ground. Retail investors can decide to back a pump and dump or not but they have little control over a short,  until now. The whole thing reeks of corruption. 

Beg to differ, it's absolutely a pump and dump.
Taking a different form than is usual, no doubt, but pump and dump nevertheless.

This right here. Shorting should be illegal seems like a pump and dump in reverse. I really hope they do succeed somehow.

I heard about this when it was $15 a share and also thought it was a pump and dump but found the whole thing fascinating so have been really interested in it. But the stock is too high a gamble now for me, if I had more knowledge when it was $15 might have gone for it. But considering the amount of upvotes my posts got I think a bunch of people on here might have!

Shorting is bad enough, but it's suspected that hedge funds have been 'naked shorting' a practice that is illegal the US.

If my understanding is correct the hedge funds have loaned out/shorted shares they don't own. This is apparent due to the short interest % vs available shares (I think,.still getting my head round that one). 

Those illegal short positions need to be closed out at some point. But there aren't enough shares left on the market for all of the naked short positions to be closed, as retail buyers have snapped so many up.

This forces the price up and the short positions can't be held indefinitely, they have a closing date that will force the hedge funds to close at the current market value.

Imaging shorting 1 million shares at £10 expecting them to plummet to £1 the hedge funds pocket the difference. Only now the price has rocketed from £10 to £1000 and the hedge funds owe the difference / are force to buy the shares at the new market value.

https://marketbusinessnews.com/financial-glossary/what-is-naked-short-selli...

I probably haven't got all of this right but it gives a general outline, i think?

Yup. It's a free market, or it isn't. If you want to play silly games with borrowing stocks to gamble on shorting, be prepared for some other people to play a different game, and give you a bloody nose. Take the knocks.

If the authorities were concerned there was funny business going on, they should have supended all trading: they didn't; they only suspended the small traders, not the big boys.

As far as I can make out, anyway...

I think that's why they are saying that as long as everyone holds they will get paid because the hedge funds will have to buy all the shares that exist to cover their shorts, but that's too much trust to place in other people when that much money is involved.

Yea, it certainly needs a lot of trust, but there's also a lot of anger directed towards these institutions and the elite. There's a kamakazee type mind set on the forums, as the price creeps higher so to do the people's expectations of it's upper limit.

Given the anger, political tensions, covid, wealth inequality. The ingredients are there for a revolution of sorts, only it's livelihoods not lives bening laid down. But only time will tell.

From what I have read this isnt the case.

Naked short is when you dont own a share and dont have any claims on that share. You just lie and hope it somehow falls through the cracks in the system.

It seems since the number of shares shorted >100% people are assuming its naked shorting. However it could just be several rounds of shorting.

I borrow the share from you (paying a percentage fee and promising to give it back to you in a weeks time) and sell it to someone else.

That person doesnt have a clue that I borrowed it. They just brought it on the open market and have full rights to it. They could then decide to lend it to someone else and so we end up with the same share being shorted twice completely legally.

What do you know, mini bubbles forming everywhere within the giant bubble... how surprising.

It's exactly how this started. The GME share has been shorted more than it exists, and that started the reddit movement when WSB made it public that this was the case. 

That's why the squeeze is predicted to be big as there simply isn't enough stock to fulfill the shorts.

What's insane is even in this thread there is this narrative that the reddit/ retail investors are the bad guys. Do some of you guys really side with investment bankers and hedge fund managers? If they are literally screwing people out money that's fine because it happens all the time?

It seems to be some really piss poor communication from the trading apps not least due to them trying to hide how badly they were exposed to risk.

Most of the people using those apps were trading on margin. For some archaic reason the US share trade takes 2 days to be formally settled. The clearing hubs require a percentage of those outstanding trades to be deposited by the trading company with them in case things go tits up.

I am not sure if it was simply the sheer number of trades/price of shares which used up all Robin Hoods and co cash reserves or if the clearing hub increased the percentage since they were a tad nervous about the volatility but either way the cash on deposit was all used up and hence they couldnt allow anymore buying until it was reduced/they got more money to deposit.

The big boys would have been able to deal direct with cash in hand and so not been locked out. If you had an old fashioned broker and were willing to hand over cash you would have been able to keep playing. In theory the app companies could have allowed it for people with cash in hand but changing the code to support it would have been challenging especially since they were probably busy just trying to keep it up.

For those, like me, with just a cursory interest in finance I recommend signing up for Matt Levines newsletter.

Just because a lot of people have decided to pile into a stock for the short or medium term does not automatically make it a pump and dump. Plenty of people use momentum and technical chart analysis rather than fundamentals to make decisions on stock. They may intend to switch gears in a day, a week, or a month. Investment managers and funds do this all the time with lots of people's money. Also the stock was genuinely undervalued at the point when Reddit started talking about it and the ridiculous price is actually now just a result of hedge fund arrogance. 

For it to be a pump and dump, you have to *pump* rather than just buy the stock. Pumping involves deception, falsehoods to artificially inflate the price. It is a scam, it involves lies.

No one on Reddit is pretending that GameStop will rival Amazon and Alibaba and become a behemoth. The information on Reddit is highlighting a short term opportunity because of the shorts held in the company. It's no more a pump and dump than a raffle, except in this raffle much of the money has been kindly put in by another party (the hedge funds). 

I think almost the investors know what they're in for. Go read Wall Street Bets, plenty of people are in this, not for the money but to stick it to the man. Many have bought in late at hundreds of dollars per share knowing full well they've a really good chance of losing most of it and they don't care. 

There's a genuine transfer of wealth going on here between the retail investors and the hedge funds. A lot of the gains are fuelled by the billions the hedge funds are hemoraging and not from other retail investors.

If an individual took a short position and couldn't cover their position, their broker would have closed their position and the person would chalk it up to bad luck. These hedge funds have doubled down and refused to buy back in at a modest loss because they know better than everyone else. That's not anyone's fault but their own. 

This probably was part of the case, but since the finance of these platforms comes from the companies that are also part of the hedge funds shorting the stock it is such a huge conflict of interest that can't be ignored.

Okay so how do you want to not ignore it?

What about those finance companies, also invested in the platforms, who have benefited from bailing out the hedge funds which have been hammered but have no further exposure after the bailing out?

Thanks; that's a helpful clarification of the situation which does put a different light on things...

Don't you think it's a bit more nuanced than this?

Of course a lot of people are going to get burned - the valuation is waaaaay out of whack with anything real.  A few will get rich.  So those things do look like ramping.

But it's exposing some very uncomfortable truths about how the system works (they've been in plain sight forever, but it shows the logical conclusion).

We have a market system that allows >100% short positions - fantasy trading.

We have a market system that discriminates against retail investors in favour of corporate ones.  Everyone kind of knows this (shaking the tree etc.) but it's now been dramatically enforced.

We have a market system that allows the big money to twist the knife in temporary wounds and destroy viable companies for profit...but prevents retail investors from doing the same, or even from buying to prevent this.

We pretend that collusion isn't occurring in the market makers when it clearly is, whilst condemning Reddit style action.

Pretty f*cked up I'd say.

Just remember this happened at crucial moments, and helped aid the interests of the financial giants who fund these platforms. 

The extremely short term interventions to enable RH et al to top up their margin deposits at the various market clearing houses are/were designed to relieve stress on the financial system’s plumbing. It has nowt to do with protecting the hedge funds and everything to do with protecting the wider market’s participants, ie everyone’s pension, and the jobs that depend on employers enjoying access to capital markets, ie most of them and quite possibly yours. These adjustments occur constantly and as a matter of course.

The investment community as a whole, and to which I belong, is perfectly sanguine about the new trading model we are witnessing and lacks sympathy for the hedge funds. But the community also understands the value of short-selling as a price discovery mechanism - think Enron or Wirecard - and reserves its contempt only for those who would go short on an issue already over 100% shorted. They got what they deserved and well played DeepFuckingValue!!

Then they will have nothing to worry about with the legal recourse which is surely to follow, as they definitely didn't do anything wrong and the manipulating effect they had on the market was purely coincidental, heck I bet those good ole boys didn't even realise it would make a difference! 

Oh yes, the investment community is so good and transparent that this must be the only time naked shorting -an illegal practice - has ever happened. Bet they wouldn't dream of breaking the law, and if they did they would surely have the rest of the outstanding "community" to answer too. Who is responsible for allowing a stock to be shorted over 140%? As much as you want to pin the villain on hedge managers they are simply a piece to this. 

depends if you are on the jury I guess. You seem to have concluded that they are guilty.

Do you have any evidence for this happening as opposed to just simply seeing the >100% figure? As above it can happen legitimately.

If I borrow a share from you and sell it to BnB and he then lends it to someone else we have 200% shorting.

Now you could argue that shouldnt be allowed but its different from naked shorting. Which would be when I sell the share to BnB without bothering with the tedious detail of borrowing/buying it myself first.

No chance. I ain’t buying!!

So why did they only restrict retail buying? The 'adjustments' I think you're referring to are circuit breakers, correct? Because what we saw here certainly wasn't your run-of-the mill plumbing maintenance. The price (and short interest) tanked. It's blatant manipulation caused by the guys who are usually used to winning. 

Right, because they can legitimately and "accidentally" short it over 40%. Oopsie. And without all this going on it would have assisted in bankrupting a business with employees who would then be out of a job. Oopsie!!

Oh and made them millions of dollars ... Oopsie!
If only there was regulation that controlled these things...

I wonder how many times that "accident" has happened? And you wonder why public opinion on these people is low. It's not even gone down it's just a reminder on how far away these people are disjointed from the average person. 

They didnt. Some brokers, especially the more popular ones, restricted buying. If you had gone with others then you would have been able to continue.

The primary reason is although the share trading appears to be instant it actually takes 2 days to be confirmed by the clearing house. Brokers are required to keep a certain percentage of the outstanding trade cost on deposit at the clearing house in case some fail. The sheer number of trades and the jump in share price exhausted those deposits especially since they have a mechanism where as the volatility/price jumps then so does the percentage deposit.  Robin Hood raised an extra billion to allow it to continue.

In addition some dont seem to have been able to scale effectively and so you were getting a bunch of technical failures on top.

Currently yes. Although as in this case its possibly not a great idea since then you end up competing with all your fellow shorters to rebuy the shares to pay off your debt.

Right, at a key moment, when retail traders are incapable of doing that without the verification time it takes to move platform.

But that's not true, and that's why there is this regulation that exists within the brokers. It's obviously a corrupt and broken system which needs reformation. It's gone beyond caring what actually happens to the stock price and doing anything to make sure this isn't forgotten about and just carries on as normal. Something which feels like you are incomprehensible arguing for. 

Exactly. The balance started to tip the wrong way, so they pulled the plug. 

Interesting read here:

https://www.reddit.com/r/wallstreetbets/comments/l97ykd/the_real_reason_wal...

There's also anecdotal / photographic evidence of calls being fulfilled in the 'shut down' apps at $1,500+ share prices, just before the black out. Things were about to completely unravel. It's going to be a fascinating few weeks watching this play out.

Yes at a moment where massive numbers of people had jumped onto the bandwagon and it was creaking at the axles. Perhaps if people had gone with the more expensive brokers they would have still be able to play? It does seem like they do have some questions to answer in terms of being able to handle load and also ensuring that people understand what sort of trading they are doing but that is separate from the evil conspiracy.

Sorry whats not true? Are you still confusing it with naked shorts?

Definitely an exciting time to witness this stuff!

Haha wow, "more expensive brokers". You are just confirming the point we are making, the system is rigged for the rich, people in conrtol.

No matter what you say, I'm not buying your accident lie.

Either they are incompetent and need to be removed. ( 140%, and no one checked they had these shares?) 

Or they are intentionally engaging in illegal trading and need to face the consequences.

Feel free to fill me in on how these poor innocent traders are the victims in this game.

Again, who would have won if the WSB involvement didn't happen?

I didnt say it was an accident so thats not a good start.

They did have the shares at the point they shorted them but if you havent understood my last couple of attempts to explain it there is no point us trying a third time.

I am pretty certain some will have been sacked for losing large sums of money if that makes you feel better?

Well yes but there is currently no evidence for that. It may come out in the, no doubt, intense investigation but I suspect they wont find any cases in this instance.

I am not defending them. I am just saying what you are getting wrong.

In your enthusiasm for conspiracy you seem to be interchanging the retail brokers, their more expensive competitors (traditional brokers), the short hedge funds, the regulator and the WSB traders. It’s very hard to follow your logic and harder still to believe you can differentiate between the various cogs in the machine. Mondite has it right when they explained that RH ran out of margin at the clearing house and had to suspend trading until it had raised another billion. As soon as that was lodged at the CH, trading reopened and the price of the short squeeze went back to max.

As for who is going to lose, it’s the poor innocents who buy from your WSB heroes just before the stock crashes near to zero - which is the utterly inevitable outcome in this scenario. That’ll stick it to the man.

The mood over at wsb is absolutely not about making a fortune, that's just surface level bollocks. There is a large number of people buying one or two shares, just to stick it to the hedge funds. Most people are not doing this as an investment, so they won't lose.
Anyway GME stock won't crash until the shorts have been majority exercised, which will take a while. See VW 2008.

Ok, you are right that I don't have evidence that naked shorting is happening (which is not the same as it not happening).

These people are still performing short attacks and driving stock such as this one, way below it's actual value simply to make money. DFV bought into these stocks in 2019 and talked about how low these values were being pushed. 

With the effect of driving companies to bankruptcy which makes them the most money.  Seems like a pretty poor goal to allow an industry to obtain.

BnB there is obviously a lot going on here, and the whole trading platform / RH debaucle is only the latest of a whole slew of behaviour. On its own, sure, it can look like an ill timed piece of the mechanism. But coupled with everything else and the relentless pursuit of money these people have demonstrated, it's almost hard not to believe that this was mearly an inevitablity. 

I'm unsure that I have an enthusiasm for conspiracy and instead a light has been shone on a pretty disgusting practice which lackes the type of transparency this industry is so desperate of. And seemily desperate to avoid - it's interesting how quickly the slander spreads about WSB, and how people react to that and ignore what we already know is a pretty corrupt industry. 

As Senzu pointed out, the community doesn't share that relentless pursuit of money. Just browse that sub for a bit and see how many charitable contributions have come from it, and that's ignoring the fact that one side is not trying it bankrupt a company for profit. The attitude has very much shifted into a united community who is happy just to shed light on, and to make that industry bleed. 

And if you have read this far, you can hold those 💎🙌

Traditionally its innocent until proven guilty and why would anyone do something so risky as a naked short? Especially since those shares werent worth a lot initially. I would be doing my naked short on something like Apple before disappearing off to a nonextradition country.

How do you know its actual value?

Yes because people didnt see much future for a company heavily invested in the high street and also in console game selling/second hand selling (aka renting under a different name to get round restrictions) when the console manufacturers being a tad annoyed about how that hits their bottom line are trying their best to make consoles online only.

Part of an industry. Also why isnt it a good idea for, say, people to aggressively short wirecard?

Some seem rather keen on it if just more willing to admit when that chase fails.

I wonder if they will make a comedic educational movie about the book that will be written about this. One of my key takeaways from The Big Short was the short sellers being perplexed their shorts hadn't moved... the reason being some of the corrupt banks had cottoned on to what was happening and saw it as an OPPORTUNITY they desperately needed in a crisis where they were so exposed. The opportunity was illegally short selling their own recommended investments. In an entire corrupt sector of that industry only one guy went to jail.

In the case of game stop chapter 11 would have been a good outcome for them. Chapter 11 is cushier than the UK regime and would have given solid protection from creditors. Bankruptcy (certainly in the US) isn’t always a bad thing.

I’m watching this with great interest now. People are going to learn the hard way and lots of small investors are going to get very badly burnt.

Is there an opposite of a (rocket emoji)?

Because 2008 showed they can get away with it.

No that showed you can make lots of cash without committing crimes. So why bother with the criminal offence?

https://www.ft.com/content/1be70d9a-91d5-4cbb-a174-37d7b52b6af2
 

It looks like the Ponzi scheme has started to collapse. A 30% fall yesterday, 50% today.

I believe Netflix are already considering a film about the current chain of events, possibly titled 'the antisocial network'

I wouldn't go so far as to call it a Ponzi scheme, for a balanced view look through r/stocks and then r/wallstreetbets. There's a mixture of solid info and idiots but it's all there.

Also take a look at the trading volumes for Tues 2nd, the volume shows many sales were offset by new buy positions, and that the drastic drop was perhaps more down to manipulation. This can't all be confirmed 100%, though I imagine investigations will find some wrongdoings eventually.

Here's a good article that shines some light on the illegal practices going on in the short selling market. Its pretty horrific reading to be honest, regulators need to do more and banks appear to be heavily involved.

https://oilprice.com/Energy/Energy-General/Naked-Short-Selling-The-Truth-Is...

Great article from a different perspective surrounding the Canadian market.
 

The sad thing is that as mattmurphy shows, their misinformation campaign is working as planned.
It's crazy that these lies are so easily to spread, when the truth is literally one click away, really shows there is little hope for truths that takes a little more effort. 

https://taibbi.substack.com/p/suck-it-wall-street

”...it was all well and good for investment banks and executives of phoney-baloney companies to gorge themselves on funhouse profits on a funhouse economy, but when amateurs decided to funnel just a bit of this clown show into their own pockets, finance pros wailed like the grave of Adam Smith had been danced upon.”

What on earth are you on about.

If you look at the share price when the Op posted and the share price now, taking into the fact that retail investors won’t have access to short facilities, the average retail investor will have lost money.

Some of them will have lost a lot of money.

How people can defend encouraging unsophisticated retail investors to throw away their money to support the positions of the first Reddit investors is just mind boggling.

All a bit overhyped anyway, the hedge funds overall were barely affected (down 0.2% for January which would be a normal swing). The Reddit group just don't have enough money to attack funds which are betting both ways.

I'm talking about the direct lies stating what WSB is doing or changing too.

There was tons of "repretable" sites and their authors claiming that they had changed their focus to silver. Whilst over on WSB they were flat out stating that this was diversery tactics. Loads of other claims were completely contradictory to what was being said on WSB, including fabricated quotes and cherry picking user names in an attempt to discredit WSB to uninformed readers who for what ever reason didn't bother to even go on the subreddit.

Even you are cherry picking and misunderstanding the community. Despite the fact that there is reason based logic/advice it is a self described "casino" not a source for safe financial advice. 

How much did you lose when the price crashed?

I did try to warn you...

Hey man, I totally get where these negative sentiments are coming from, (these are pretty shitty times and this is atleast more interesting than another Netflix show on teen fairies!) just remember you are talking to just another regular guy here.