Now i have to preface this by saying i was not expecting this to occur. I had no idea it was coming and, to be honest, i still think gamestop is a dying business, relatively speaking, that needs to radically change its fundamental operations in order to just survive, but none of that matters, because the story is that reddit, just fleeced wall street And took hundreds of millions of dollars right out from under them also, it was specifically from short sellers on margin who are often responsible for or playing into, the destruction of relative capital for other investors. So i don’t, like short sellers i’m, not an expert on the stock market. I mostly just go long on certain companies a term for buying and holding until the value just increases and i’ve had great results, but the reality is. Our financial system is a complicated beast, except with such massive complexity. There is tremendous opportunity and certain communities have emerged online, which center on that type of opportunity and speculative betting. One such community is wall street bets. This is a reddit investment board that covers a number of stocks and a number of different strategies, but for a while now there’s been a specific focus on gme or gamestop, gamestop has been in a financial toilet. Recently gamestop is kind of garbage. They posted a half. A billion dollar loss in 2018 they’ve posted higher than expected losses in two consecutive quarters of 2020 and the physical to digital conversion of purchasing habits leaves them as a brick and mortar dinosaur in a mostly digital world.
Basically, gamestop needs to change and change fast. In order to survive, but regardless of what the company is or is not, regardless of who is on the board, because that’s of particular interest to a lot of people lately or their long term strategies, none of it matters at all, because reddit spearheaded by wall street Bets just used gamestop as a weapon against wall street short sellers to devastating effect, and many of them have gotten kind of rich in the process. Again. I’M no expert, but the basic principles that allowed this to happen are sort of as follows. In the stock market you can either buy long or sell short buying. Long is the simplest method which involves getting a stock and just waiting for it to rise, get bought out or just be worth more than you paid, somehow etc. Selling short is effectively borrowing shares from a broker and then selling them onto the market, with a promise of, i will buy, shares again to return to you in the future also called covering when you do that in the hopes that when you do this, the price Is lower and you can pocket the difference, basically it’s, just the upside down of traditional stock. Investing and an easy example would be if i buy 10 shares of a company worth 10 for 100 total and it rises to twenty dollars. I sell for two hundred making a hundred dollars, but if i short ten shares of a company worth ten dollars and it falls to five dollars, i can cover my shares – re, buy them and pocket the fifty dollar difference.
The principle is to open up the potential for profit on both sides of any price movement. Short sellers can put a tremendous amount of downward pressure on a stock and make money, while doing so but that’s before we even factor in leverage short selling occurs. When you borrow shares from your broker to sell, but this act of borrowing makes it so that you can increase your buying and selling power far larger than you could actually ever back up, and this is very common on wall street. I have to keep reiterating this because it’s completely true i’m, not an expert. Our demented financial system is not something. I study nor care to know beyond my dividend. Portfolio and some future ipo investments that i’ve made, but the basic principle of leverage is that you can increase your buying or, in this case, selling power beyond what you actually have. This is dangerous because it creates margin calls a margin. Call is an official warning by your broker or your bank that essentially, you have overextended and you need to reduce your risk deposit, more cash or otherwise fix this in some way, and a margin call can happen when, for instance, the price of a stock climbs rapidly. When you are short selling a leveraged amount, that is greater than your actual holdings, to summarize borrow shares, borrow even more shares than you have the money for or are capable of paying back betting on the price to go down highly dangerous.
But if the price goes up too fast, you get squeezed and you’re in big trouble. That is what investors on reddit were counting on, and that is what caused gamestop over the span of just a couple weeks to rise by orders of magnitude that otherwise would have been completely impossible now to get to the brilliance of it. All though users on reddit identified that gamestop was being sold short by not just some but most investors on wall street, the company was under so much downward pressure that it actually gone negative in terms of float boil that down and essentially the company had issued more Shares to be sold onto the market than it even has and the potential to create a short squeeze was tremendous. So the word goes out on wall street bets and other online message board communities. People begin to marshal their forces and their capital. The goal make wall street bleed and over the past couple days, culminating in the action today, we can see their results, spoiler alert. It absolutely worked. The buying pressure from wall street bets, combined with long term dedicated retail investors from before, and perhaps even a few short sellers closing their initial positions made the price rise. The price rise brought on board some more retail investors as wall street bets continued to create buying pressure in the initial parts and more shorts had to close their positions. Closing positions means buying shares more buying pressure, higher price, more closeouts and the chain reaction began.
Picking up speed, eventually, a lot of these people were in margin call territory over leveraged and overexposed wall. Street short sellers didn’t have the capital to extend their positions, and there was no end in sight. This poured jet fuel on the fire and we started to see double digit price increases over and over again. The theory on wall street bets was that this short squeeze could rival almost any other in history and push the price per share of gme to over 400 dollars per. But there was just one problem: wall street is like a bloated, metastasized tumor and it will protect itself during trading on friday january 22nd, 2020 gme stock price was up 70 in the day and the shorts were just completely falling apart. Hundreds of millions of dollars in wealth had transitioned from hedge funds and investment firms to reddit users, and the snowball was moving way too fast to stop so blackout trading for the gamestop ticker gets halted because it’s moving too fast and the big money, the elites they Need to preserve their investments. The trading freeze mechanic is in place to prevent automated systems from going haywire. It’S happened before it’ll probably happen again, but they put in certain safeguards or to prevent catastrophic movements in the market. Gamestop trading was halted because reddit users had brutalized wall street and the shift in market capitalization for gamestop, even over just a 52 week span, was billions. The play had worked, and it worked so well that all the fail safes kicked in reddit had outplayed wall street squeezed the shorts into oblivion, on gamestop driven the price up by over 20 times its bottom value to all time highs period ever and the only way It got stopped for now because the short pressure is still quite high.
Who knows where it’s going to go in the future was a cold freeze on trading to let the suits breathe january 22nd. 2020 is the day that reddit users used a struggling company and honestly, i hate gamestop that company, i really don’t like them, but it doesn’t matter because they used gamestop as a weapon to excise hundreds of millions of dollars from near criminal, hedge funds who over leverage And game the system to the detriment of all but themselves, and i could not be more thrilled. I wish i’d been on this board to contribute to the effort. I’Ll sure should be following this in the near future, as well as any other similar communities. I can find because even beyond the appeal or the fomo of getting rich, the collective due to wall street as the common retail investors smash, their quarterly reports into the dirt is just too good to ever pass up. There is much more to this entire chain of events than i have even detailed. Reddit users were able to parse together a series of catalysts that, when combined, would result in a squeeze like no other, certain short sellers on margin would be forced to cover within three day time frames. I believe brokerages were in a position where they themselves might even have to buy and force close short positions that they’ve been holding for users with like limited warning, all sorts of stuff, and the firestorm happened exactly as they predicted a company closing hundreds of stores losing Business and hundreds of millions of dollars became in one fell swoop, a vehicle for the transfer of wealth in the opposite direction, which normally doesn’t happen away from the supposed experts away from the wall.
Street hedge funds and money managers into the hands of the people that they hate the casual investors, the retail investors, the sheep – if you will, because the power of an organized online community – was way drastically underestimated. The crazy thing is this is a public messaging board. This is wide open and people who planned this entire endeavor were effectively yelling their intentions to the world through a megaphone tens of thousands of upvotes on every thread, huge interest and plenty of engagement across the board. This was not some subtle, devious financial scheme cooked up in the shadows. It was an openly planned, publicly executed response to wall street, just over leveraging and being stupid and exposing themselves to this type of scenario through too much risk. There is always some degree of risk when utilizing the financial markets, but this was less of a risk and more of a counteraction. The only reason it didn’t go far higher is because trading was literally halted and blacked out, but it worked perfectly as far back as august wall street bets mobilized and put this plan in motion, and today we witnessed the culmination of all their efforts to all those Who orchestrated the endeavor sincerely, i salute you, it was well played well planned and well deserved a collective you to wall street. I doubt that they ever expected and though it may be small in the grand financial churn of modern day america for us in the gaming world and other online communities.
I think it’s well worth remembering that’s it, though, for anyone who wants to support there are links down below if i get banned on youtube, which is entirely possible in this new age of the platform i’ll be on odyssey, so you can follow me there, the link’s! There you can auto sign up whatever it’s also way better for me. If you watch the videos on that platform because they pay their creators well go figure also locals for those that want to support on a monthly basis, patreon but better that’s. Basically, what locals is and some other stuff too another youtuber to check out merch social media et cetera, et cetera, but i’ll cut it there and stop rambling. As always.