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The GameStop Saga: Weekend Recap

For those who missed it, here is what is going on with GameStop

  1. The week started with a big push into GameStop. GameStop is a company that by most accounts is/was struggling to build a profitable financial model. Their 52 Week low was $2.57 per share. Giving them a Market Cap of roughly $200 Million.
  2. Melvin Capital, a Multi-Billion Dollar hedge fund has shorted the company (bet the stock will go down). In fact, somehow Melvin Capital has managed to allegedly short roughly 140% of the shares, borrowing more shares than are actually in existence. Side note: when you buy a stock, you can only lose the money you invested. However, when you short a stock your losses are theoretically infinite.
  3. The extreme short position by Melvin Capital created a potential buying opportunity which was identified months ago by Reddit user DeepFuckingValue. If you can buy enough stock and options of a highly shorted company, the short seller (Melvin Capital) is forced to take losses. They may also need to rebuy shares to settle margin calls which can cause the stock to go up even more.
  4. Over the past few months DeepFuckingValue’s positions in GameStop have become something of legend, as the price went from his initial purchase price of around $5 per share, to opening the week at around $90 per share. Along the way both retail and institutional investors have gotten behind DFV and the short squeeze.
  5. One famous investor who invested big behind DFV is the legend Michael Burry who you may know from The Big Short. He put a large buy position on and is rumored to have made well over $300 million.
  6. By Tuesday night the stock is up HUGE closing the day around $145 per share
  7. We enter what is known as a Gamma Squeeze this is a cascading effect that occurs when prices move up quickly against short sellers. Quick Analogy: If a short squeeze is fast like a Corvette, a Gamma Squeeze is fast like a Tesla in Plaid mode with a Space X Rocket booster strapped to it (we will get to Elon later).
  8. Wednesday morning: “We Like The Stock”. Stock moves to over $300 per share and closes the day over $350
  9. The band of retail investors, Robinhood traders, and heavy hitters grows huge on the buy side. Elon Musk steps up, for those who don’t know Elon, in addition to being the richest man in the world he also is likely not a huge fan of Melvin Capital as he went to battle with them when they tried to short sell Tesla
  10. Melvin Capital’s losses are reaching a point of potentially financially breaking their entire fund, allegedly at this point Citadel steps in to lend a few billion to help bail out Melvin Capital.
  11. A Battle Cry is let out “We can Stay retarded longer than they can stay solvent”
  12. Thursday morning GameStop opens up to an insane upswing and hits over $450+ per share. DeepFuckingValue is man of lore as his initial $50k investment is now worth over $50m
  13. Here is where things get dark…
  14. At this point in time Robinhood and a few other brokerage houses stop allowing traders to buy GameStop, they only allow you to hold or sell. Allegedly from many reports, Citadel who helped bail out Melvin Capital is actually one of the biggest customers of Robinhood. Additionally from reports seen, Robinhood operates as a platform that allows traders trade commission free, but then sells the data of how retail traders are trading to Citadel and other institutional players. In other words, if you are using the product for free you are the product and your data is being sold.
  15. According to Justin Kan “Citadel reloaded their shorts before they told Robinhood to stop trading GME”
  16. GameStop Shares drop from $450+ per share to $130 per share in a matter of minutes as many traders literally are only able to sell.
  17. The list of big players supporting GameStop erupts. Names include: AOC, Dave Portnoy, Mark Cuban, Elon Musk, and Chamath Palihapitiya go to social media with outrage. For the first time in a long time Both democrats and republicans are agreeing that this is not acceptable. Many state that the founders of Robinhood should be thrown in Jail
  18. WallStBets Reddit channel explodes to over 6 million users.
  19. Shares climb back slightly on Thursday to end the day just under $200 a share
  20. Friday opens with a big step up, Opening around $345. Despite the limits on purchasing on Robinhood the share price holds closing the week at around $325 per share.
  21. GameStop is now a $22 Billion company
  22. DeepFuckingValue is on the front page of The Wall St. Journal.

Can’t Stop, Won’t Stop, GameStop

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