Hedge fund tries to short Gamestop, now gets short squeezed by R/wallstreetbets

[MaxQue]

I don't understand why we're talking about regulating Reddit when these hedge funds shorted well over 100% of $GME lol. This short squeeze would not happen on just some generic stock, these people got too greedy and made a mistake and are refusing to eat the loss.

If you think excessive shorting of stock is unhealthy for the market then you should lobby the SEC to enact regulations against it. The solution is not to blow up the market completely. The relevant funds have already eaten the loss. This logic is like MAGA saying that their storming of the Capitol is justified in retaliation against BLM and Antifa torching police stations last summer.

On the subject of regulating Reddit, if the manipulation were coordinated by say 20 institutional traders over Bloomberg Chat, the chat log would quickly be uncovered and these traders would be facing dismissal from their firms and being barred from the industry, and their firms would have to pay back the ill-gotten gains plus additional penalties. The fact that retail investors coordinated were able to coordinate over Reddit is clearly a loophole that needs to be addressed.  

The issue is that it creates an inequity in such that huge hedge funds are the only ones able to affect the market.

The sums that one hedge fund can invest is bigger that many investors over Reddit and the fact the former is allowed to did it because they are one entity while the latter can't because they are not is not based in logic or anything.

It's based in preserving the power of established players.

[MaxQue]

I don't understand why we're talking about regulating Reddit when these hedge funds shorted well over 100% of $GME lol. This short squeeze would not happen on just some generic stock, these people got too greedy and made a mistake and are refusing to eat the loss.

If you think excessive shorting of stock is unhealthy for the market then you should lobby the SEC to enact regulations against it. The solution is not to blow up the market completely. The relevant funds have already eaten the loss. This logic is like MAGA saying that their storming of the Capitol is justified in retaliation against BLM and Antifa torching police stations last summer.

On the subject of regulating Reddit, if the manipulation were coordinated by say 20 institutional traders over Bloomberg Chat, the chat log would quickly be uncovered and these traders would be facing dismissal from their firms and being barred from the industry, and their firms would have to pay back the ill-gotten gains plus additional penalties. The fact that retail investors coordinated were able to coordinate over Reddit is clearly a loophole that needs to be addressed.  

Also, is a taking head on TV saying X stock is a good buy is market manipulation?
Should we ban any forums or discussions on the stock as any opinion can be interpreted as an opinion?

[MaxQue]

No one is saying these retail investors are heroes or anything. Some of them are rich but a lot of them are just ordinary Americans investing their stimulus checks into something where they saw a chance and a major screw up by a big player. Rather than the market rewarding at least the earlier group of these people for seeing a good chance the market decides to mess the whole game up so the original big guy will win in the end.

1. These "ordinary Americans" are free to close their positions and collect their 1000% profit.

2. Melvin Capital and Citron Research have closed out their shorts at massive losses. To say the "big guy" will win is untrue.

3. The behavior of AMC/GME stocks the last few days is totally unnatural and unhealthy. It was caused by collusion among market actors. These are prohibited behaviors, if institutional market participants colluded like this the SEC would shut them down immediately. The fact that retail investors were able to collude using Reddit as a forum is a loophole and I'm sure the SEC is studying this situation now. New regulations (on retail brokers probably, maybe additional scrutiny on forums like r/WSB) will be coming to address this behavior.

Basically the WSB logic is very similar to the MAGA logic on the morning of Jan. 6, "We're going to have an armed protest and storm the Capitol, we're on the right side since we're overturning the stolen election, nothing's going to happen to us since the police are undermanned and on our side, what could go wrong?"

I'd like you to elaborate a bit on this "collusion." From what I can see, there's no kind of formal agreement or strategy among investors to act. Certainly there are a lot of people on Reddit and Twitter saying that they're buying the stocks and intend to do so to punish the short sellers, but its hard to see how that could be collusion under any definition. If a bunch of people decide to buy based on the stories they hear about others buying/bad hedge fund behavior how is that any different than investors buying when they hear that a company had a good quarter or selling when they hear about a corporate scandal?

The discussion on WSB was "everyone buy GME and GME calls now", so people did so, drove GME shares up, causing a short squeeze.

Similarly, Trump said there would be protests on Jan. 6, yelled on Twitter repeatedly about it, then gave a speech at the White House on Jan. 6 saying everyone should go to the Capitol, and they did so. But so far we don't have evidence that Trump directly coordinated with any group about Jan. 6 events. So Trump has done nothing wrong?

Also, isn't everybody deciding to restrict trades on those stocks collusion too?

[MaxQue]

As I was saying, the SEC is now looking at enforcement action against the GameStop traders.

https://finance.yahoo.com/news/will-the-sec-sue-gamestop-traders-183845241.html

Traders who gobbled up GameStop (GME) stock in the Reddit-user-fueled push to squeeze short sellers could end up on the defending side of enforcement action if officials can find out who they are and show they tried to manipulate or deceive the markets.

Indeed, Fox Business Network’s Charlie Gasparino tweeted on Thursday that regulatory sources were telling him they would be looking at a market manipulation case related to GameStop trading.

However, a successful case against those who caused the spikes is no slam dunk. That’s partly because it could be hard for regulators to show that traders intentionally deceived market participants into thinking that GameStop’s fundamentals were healthier than they actually were.

And what about Robinhood and others actions to slow down trade? Aren't those market manipulation too?

[MaxQue]

So what is GameStop going to do with all this extra new capital?

Nothing, because capital isn't real.