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The battle over Gamestop is getting really interesting

LordOfChaos

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Long story short, some hedge funds bet that they were going to go bankrupt last year and that the current generation of consoles would be digital only.

They were wrong on all accounts and didn't unwind that bet.

Some value investors noticed and went in big. Then they told some degenerate gamblers (wallstreetbets) about it and they all started piling in.

Now the hedge funds bet that they would make $400MM dancing on Gamestop's grave is looking more like they will need to pay out billions to stay out of their own grave.

Interestingly Reggie had joined their board of directors early last year


The renewed interest is in a large part due to Ryan Cohen of Chewy turnaround fame joining as well


To some, it smells like a takeover, and Gamestop's has delivered a 257% increase in global E-Commerce sales, while the bear thesis was about digital only consoles killing them completely, and consoles with disks have been outselling digital only editions vastly this generation.

Just find it really interesting that some of our favorite childhood stocks has become the battleground between a big institutional short seller (Citron) and a bunch of mostly younger people fighting the fight with memes and shitposts. The longer people hold, the more they buy, the more shorts are forced to cover and make the stock skyrocket. I also wonder what Reggie saw in it, and Ryan.


(stonk was $39 when I posted this)

So is the squeeze squoze?
 
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DGrayson

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Dthomp

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LordOfChaos

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I told everyone that it would be a good idea to go all in back when it was like 3 bucks and I didn't even take my own advice and now I'm going to throw up.

I vividly remember thinking about picking up a bunch of AMD as a penny stock and leaving it for years to see where it went...Look at it now. Ouch.

But I don't think you're too late for this one, I think it's just starting. It's still nearly 100% short, much of that short action is on margin, they have to pay for each day they're on margin, so the longer degenerates buy and hold, the more pressure there is to cover their shorts, which creates buy action and the once in a decade infinite short squeeze. If that thesis is right, it's barely a few percent into it.


Look at Blue Apron that was only at 50% short interest.
 
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LordOfChaos

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I havent understood a single word in this thread that wasn’t “Gamestop”

tl;dr version: firm thought this generation would be all digital and went short on Gamestop, shorting is betting the price will go down. Some investors noticed that they never exited this bet after it was shown demonstrably false and disk consoles are outselling digital, plus Gamestop has other catalysts of its own like their growing digital sales anyways.

So now a bunch of individual investors are piling into $GME and holding the stock price up. The longer this happens, the more pressure there is for that firm to close their short positions, which causes what's called a short squeeze, a sudden movement up in price as shorts cover which causes a price rise which causes more shorts to cover. The short positions are basically trapped, and once they are forced to close GME goes 🚀


It's really quite interesting how a bunch of memers on reddit can take on a longstanding investment firm, and it looks like they may well win.
 
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LordOfChaos

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I hope everyone betting on gamestop dying lose all their money. As a Gamer I don't want game stores going extinct.

Yeah it seems malicious to want a business to die if it had any possible life in it. I'm sure shorts are needed for a healthy market in some way, but it's fun to see a bunch of individual investors rise to defend a company like this and watch it blow up in the shorts face.
 

Kerotan

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Yeah it seems malicious to want a business to die if it had any possible life in it. I'm sure shorts are needed for a healthy market in some way, but it's fun to see a bunch of individual investors rise to defend a company like this and watch it blow up in the shorts face.
Maybe there's a good reason for it but seems a scummy business. I'm glad I'm not involved in this line of work.
 

TexMex

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GameStop as a business has some really shitty practices though and the consumer experience of being in one of their stores is a total chore. It’s a place I go only because I have to for whatever reason. I don’t fault anyone for hating GameStop.

And while technically true I even have problems calling them game stores now. When you walk in, it’s 60% junk, toys, gamer socks, etc. and I expect that gap to continue to widen over time.

Also not sure so many people were rooting for failure as much as they were reading the room. It’s pretty logical to predict their demise. Which is coming, just not as soon as many assumed. He’ll walk through the game section of any Best Buy, Walmart, etc and compare it to something as recent as five years ago. I’m not rooting for this, I buy physical almost exclusively. But it’s happening.
 

Mahavastu

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Long story short, some hedge funds bet that they were going to go bankrupt last year and that the current generation of consoles would be digital only.

They were wrong on all accounts and didn't unwind that bet.

Some value investors noticed and went in big. Then they told some degenerate gamblers (wallstreetbets) about it and they all started piling in.

Now the hedge funds bet that they would make $400MM dancing on Gamestop's grave is looking more like they will need to pay out billions to stay out of their own grave.
Tbh, it looks like one should now go short on that stock. The stock went up more then 10x since August and the company itself is still in a very weak position with uncertain future.
I doubt they will stay as high as they are now lets say a year from now.
 

LordOfChaos

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Tbh, it looks like one should now go short on that stock. The stock went up more then 10x since August and the company itself is still in a very weak position with uncertain future.
I doubt they will stay as high as they are now lets say a year from now.

A year from now is a pretty different question. The real question is if current shorts can stay solvent longer than WSB can stay retarded, and the answer is leaning towards no, which makes for explosive potential even after the 10x increase.

It's up another 10% post market. The more it gains, the more shorts have to cover, the more it gains.
 

Mahavastu

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A year from now is a pretty different question. The real question is if current shorts can stay solvent longer than WSB can stay retarded, and the answer is leaning towards no, which makes for explosive potential even after the 10x increase.

It's up another 10% post market. The more it gains, the more shorts have to cover, the more it gains.
... but then the short squeeze might already have happened? A short must be suicidal not to re-buy the stock already.
I usually think about 2-3 years for an investment, so one year for gamestop is already a lot for me ;)
 
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LordOfChaos

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... but then the short squeeze might already have happened? A short must be suicidal not to re-buy the stock already.

It's at 97% short shares...68.13M shares short, 249.67% float. Still a long way to go. If the thesis is right, that was only the first leg so far.

 
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TransTrender

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I told everyone that it would be a good idea to go all in back when it was like 3 bucks and I didn't even take my own advice and now I'm going to throw up.
Same
When this was thrashing around $7-$10 I was going to jump in, but then the next day it was $35.
100% pure insanity and not real
 

AJUMP23

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I have worked with the WSB to make some money. I did not get on this train though. Too bad.
 

iHaunter

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tl;dr version: firm thought this generation would be all digital and went short on Gamestop, shorting is betting the price will go down. Some investors noticed that they never exited this bet after it was shown demonstrably false and disk consoles are outselling digital, plus Gamestop has other catalysts of its own like their growing digital sales anyways.

So now a bunch of individual investors are piling into $GME and holding the stock price up. The longer this happens, the more pressure there is for that firm to close their short positions, which causes what's called a short squeeze, a sudden movement up in price as shorts cover which causes a price rise which causes more shorts to cover. The short positions are basically trapped, and once they are forced to close GME goes 🚀


It's really quite interesting how a bunch of memers on reddit can take on a longstanding investment firm, and it looks like they may well win.
It was a pretty fair assessment of the portfolio and where the future was going. Especially since there were digital versions of both next-gen consoles AND digital sales were on the rise as well.

Especially with COVID being at the forefront of everything else, lock-downs, etc. I almost put in some short stock myself but ended up going into Zomedica.
 
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kiphalfton

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Miss out on like a daily basis. Was at $37 at one point today then up to $43 at the end of the day. Crazy. Will probably jump on board when it goes down to $38 or so.
 

JetSetJustin

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GameStop as a business has some really shitty practices though and the consumer experience of being in one of their stores is a total chore. It’s a place I go only because I have to for whatever reason. I don’t fault anyone for hating GameStop.

And while technically true I even have problems calling them game stores now. When you walk in, it’s 60% junk, toys, gamer socks, etc. and I expect that gap to continue to widen over time.

Also not sure so many people were rooting for failure as much as they were reading the room. It’s pretty logical to predict their demise. Which is coming, just not as soon as many assumed. He’ll walk through the game section of any Best Buy, Walmart, etc and compare it to something as recent as five years ago. I’m not rooting for this, I buy physical almost exclusively. But it’s happening.
When I worked for GS, it felt like it was pretty much all just kids coming in to buy Roblox currency. Not sure what the profit margin is on digital currency but it can't be much. No one really ever bought the novelty crap -toys, socks, shirts, etc.

I much prefer to go to my local retro store, Classic Game Junkie, which is practically half videogame museum and is just baller to go and look around in.
 

Bryank75

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The minute I heard Michael Burry was in on Gamestop... early last year or before, I knew that it would be a winner position. Guy is very insightful.

You could make a fortune at the moment on stocks if you know gaming, tech and medical very well...... between Gamestop, Sony, M3 inc and BiliBili and a few more, you'd be laughing.
 

MrA

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I hope everyone betting on gamestop dying lose all their money. As a Gamer I don't want game stores going extinct.
yeah but they ask me if I want a warranty or to pre-order or if I have any games I wish to trade, now shopping at amazon that is ace, they offer me a protection plan for my purchases that I can choose to click on to turn off, create a list of games I might be interested in purchasing, and inform me about the potential selling value of games I might have, plus I don't have to leave my house as I'm allergic to natural light.
 

LOLCats

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The minute I heard Michael Burry was in on Gamestop... early last year or before, I knew that it would be a winner position. Guy is very insightful.

...
did not know he was involved... indeed seems this article told the future.


From Sep 2019.
GameStop is currently sitting on $480 million of cash.

Burry believes that the company should use $240 million of that cash to immediately start repurchasing shares hand over fist.

With its high short interest, GameStop’s daily trading volume is unusually high.

This high volume would allow for the company to repurchase a huge number of shares quickly.

Repurchasing $240 million worth of stock would not involve a trivial amount of GameStop shares.

It would make a massive reduction in the outstanding share count — almost 80% of GameStop’s shares would be retired.

If the short sellers see that GameStop is following Burry’s advice and aggressively buying back stock, the shorts are going to flee from the trade.

To cover their short positions, they’ll need to buy GameStop shares.

With 60% of the float sold short that means an incredible wave of buying.

When that happens, GameStop’s shares are going to skyrocket in a breathtaking fashion.
 
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Kerotan

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yeah but they ask me if I want a warranty or to pre-order or if I have any games I wish to trade, now shopping at amazon that is ace, they offer me a protection plan for my purchases that I can choose to click on to turn off, create a list of games I might be interested in purchasing, and inform me about the potential selling value of games I might have, plus I don't have to leave my house as I'm allergic to natural light.
That sounds good just remember amazon is only offering such good deals because there's competition. The more stores that close the less incentives they have.
 
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While the short term gambling stuff is pretty funny, it's only going to delay the inevitable. The company is still marching into the grave. I don't see any plausible way to turn it around. Everything is moving towards digital, and I don't see any way that GameStop has an viable means of getting some of that revenue. So that leaves them with tons of real estate costs and not very much revenue.

But this is a lesson learned on why short selling is generally not a good idea unless it's some sort of hedge against a long position. For short selling to work, you have to not only make the right judgment but you also have to time it perfectly. Timing is everything. It's the same deal with Tesla, that company is in an enormous bubble that is going to implode...but how long will it be before the fat lady stops singing? I'm certainly not going to try and time it, and Michael Burry (from "The Big Short" fame) is feeling the heat right now even though is almost certainly correct that Tesla is in an enormous bubble.
 

MrA

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That sounds good just remember amazon is only offering such good deals because there's competition. The more stores that close the less incentives they have.
no I was pointing out that amazon does all the things people complain about gamestop doing but overlook it (and probably fall for it more) because it is simply a check box on a website.
 
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Buggy Loop

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Hundreds of thousands of puts expire tomorrow. Is this the beginning of the squeeze? Are we looking at a mini VW 2008? Because if yes, then even buying at 43$, you would make a lot more and soon enough if it skyrocket from shorts dying off.
 
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LordOfChaos

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Hundreds of thousands of puts expire tomorrow. Is this the beginning of the squeeze? Are we looking at a mini VW 2008? Because if yes, then even buying at 43$, you would make a lot more and soon enough if it skyrocket from shorts dying off.

That's the idea, the longer it's held the more shorts have to cover, and with 97% short, there's still a lot of room to go to the moon, even though it's already up 10x.

IF the thesis is right, this could be joining one of only a few "infinite short squeezes"

 
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theclaw135

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It isn't unimaginable for Gamestop to stop flailing around, find a path that'll rebuild consumer loyalty. They hold a colossal retail footprint and an effective strangle hold on their particular market niche.
 
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Reizo Ryuu

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That's the idea, the longer it's held the more shorts have to cover, and with 97% short, there's still a lot of room to go to the moon, even though it's already up 10x.

IF the thesis is right, this could be joining one of only a few "infinite short squeezes"
So you're saying it's actually a good idea to jump in even at 43$?
If so, how would a stock nooblet like me do that?
 
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Soodanim

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tl;dr version: firm thought this generation would be all digital and went short on Gamestop, shorting is betting the price will go down. Some investors noticed that they never exited this bet after it was shown demonstrably false and disk consoles are outselling digital, plus Gamestop has other catalysts of its own like their growing digital sales anyways.

So now a bunch of individual investors are piling into $GME and holding the stock price up. The longer this happens, the more pressure there is for that firm to close their short positions, which causes what's called a short squeeze, a sudden movement up in price as shorts cover which causes a price rise which causes more shorts to cover. The short positions are basically trapped, and once they are forced to close GME goes 🚀


It's really quite interesting how a bunch of memers on reddit can take on a longstanding investment firm, and it looks like they may well win.
Thanks, appreciated. Now I just need to understand what any of those terms mean and I’m golden. Which way is Google again?
 

LordOfChaos

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Wow, this is difficult to understand. Lol.

Even more tl;dr:
-Firm thought generation would be digital only and bet Gamestonk stonk would go down
-A bunch of degenerate gamblers made it not go down
-The longer it doesn't go down, the more that firm has to pay to keep holding on
-Eventually, they'll have to "cover", exit their bet that it'll go down and be forced to buy at whatever price

It's like holding your hand over a pop bottle and shaking it, and hoping the fizz subsides before it explodes out of your hand. But another guy keeps shaking the bottle and your hand is running out of energy, and all this denied pressure is going to end in an explosion.

Whether Gamestop dies in another 5 or 10 years is immaterial. Right now the shorts are trapped, and there's only so many shares to keep selling short. Once they have to cover it's a chain reaction.

So you're saying it's actually a good idea to jump in even at 43$?
If so, how would a stock nooblet like me do that?

It's a gamble, and I'm not telling anyone what to do with their money, but I do feel like the shorts are trapped and WSB can stay retarded longer than shorts can stay solvent. Or you could lose most of your investment if it turns out to be a dumb idea, but I do think the shorts are trapped. Robinhood, Wealthsimple Trade, Interactive Brokers there's lots of ways to go, if you're in America and young the first one is the usual option.
 
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Evil Calvin

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Until they fix their online ordering they will never succeed. It's nothing like Ebay where you see the actual game you are buying. With Gamestop you don't know if it's disc only in a sleeve or in a case. If in a case you don't know if it has a manual. I'm not paying even used prices for a disc in a sleeve.
 
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Derktron

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I won’t be surprised if Amazon or Walmart buys them out to make their own gaming store.
 

LordOfChaos

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Ok so let’s say I put $500 on this. How long do I hold it?

Whenever they get tired of paying interest - they just paid $800M on Wednesday. No one can tell you when, but it seems like it's going to be soon, and you'll know it when you see it.

If you're getting in, don't buy at 47 and sell at 55, don't buy at 47 and sell at 40, there's only been a few infinite short squeeze events in history and they've all been explosive. Diamond hands, no fidgeting on a dip or selling at a modest gain, the game is holding the line until the shorts are out out of running room.