I bought into the GME hype on Jan 25th at $60 a share. By all rights, this stock was maxed beyond belief already. On Jun 30th the share price was a mere $4, meaning it was up a cool 1500%. What really changed between those two dates for the business? Nothing. At least nothing substantial that warranted this massive jump in valuation.
Instead, there were two main drivers, which caused me to get into the fray.
1: There was an interesting phenomenon occurring called a short squeeze. This occurred because the stock was shorted over 100% of the current # of shares that existed in the world. In fact, it was shorted by around 130% at its peak. This means the people who shorted the stock would, at some point, have to buy back the stock. If more people start buying the stock, its demand goes up, and thus the price of the stock goes up. Eventually, all of those in a short position would be in a tight spot. Since they already sold stock they didn't yet own, they would need to buyback. This would cause even more buyers and drive the price up even higher. This was logical and something I saw potential in.
2: The community purchasing the stock, r/wallstreetbets was infectious. Everyone, thousands of people at a time, would post on reddit and cheer each other on. They would post compelling stories about the peak of the stock, when it would occur and why it would occur. Much of the reasoning was logical, though there was obviously a large quantity of poor information as well. There was also a large, ongoing concept of "sticking it to the hedgies" (hedge funds), who had the short positions. We, as a community, would be helping to propel the price up, which would cause hedge funds to buy the stock, then we would sell. The coordination of this effort would have to be absurdly well timed - but it felt like a coup. The everyman would get some wealth from the hedge funds and we would come out on top!
Then… everywhere I looked, I saw GME. Billboards were bought, planes were flying around pulling the stock ticker, graffiti on walls, were whispering about it. I never felt like I was a part of anything like that before - well maybe that one month of Pokemon go.
This extended to celebrities, famous investors, and politicians. Sam Altman, of Silicon Valley royalty (among many others), changed their handle and commented a lot on the event's current status. It seemed like everyone was working together to "take GME to the moon".
But then.. the weirdness started. And the lines of truth began to blur. The stock was skyrocketing, hovering around $300 per share. WSB realized that short positions were probably starting to close, but it was impossible for all positions to get closed quickly. You see… there was 130% of stock shorted. This number may have dropped to about 100%, but roughly 50% of the folks holding the shares that would need to be bought were held by either people on WSB or GameStop employees. If all of these outstanding positions were closed, the stock would have to skyrocket - likely much further than what it currently was. Or at least thats what WSBs was reporting.
On the other end of the spectrum, folks, including Nasdaq's CEO we're trying to close the market. The reasoning was to allow big investors to adjust their positions to ensure that they were in an ok spot for the current frenzy.
At the same time, Robinhood - the famed trading platform for retail investors - restricted purchases of stocks like GME. This restriction would ensure that large companies would be able to buy back positions, without running the rick of a large retail surge of purchases, which again would drive the price up. Here's the main kicker, the hedge funds are the same companies would pay Robinhood and sit on their board. These are the same hedge funds which were getting massive losses due to the GME meteoric rise.
This, obviously, caused people to revolt against the platform…
The best part was it brought the two most polar opposite politicians together.
To divert attention away from the matter and hopefully divert away dollars, major media outlets kept presenting "the next GME". Silver was among one of the main candidates proposed - and the funny part is that there was very little conversation about any other stock. A glance on WSBs would show that 99% of the conversation was about GME. This felt like a clear diversion technique
This idea of media manipulation is not new. There are a surprisingly large number of in-depth scholarly research articles which find a correlation of hedge funds practices and major media outlets - and there is a famous bit from Jim Cramer which talks about this practice.
This drove people to "fight" even harder against the media. My favorite Reddit post on Sunday, as things started to look a little grim, was this:
Within 3 hours, 20 thousand people took time to upvote this post. Hundreds of thousands more saw it and were rilled up to go out, change the trading brokerage, buy more GME and stick it to the hegies.
But what did u/runnerd81 actually do? Did they buy more stock? Or did they decide that the hedge funds won the market? Are they manipulating the buyers as much as major media? Are they potentially connected with the hedge funds themselves? Some think one of the leaders of the WSB's movement, deepfuckingvalue, was manipulating the market and sued him for securities fraud
This is where multiple realities start to emerge. No one really knows what's really going on. There is speculation happening on WSBs on if the stock has "squoze" already, the hedge funds are speculating on what the redditors will do, robinhood is speculating what will happen if they allow trading vs if they close it down, and the government is speculating what will happen if they step in and take action vs if they turn a blind eye.
The retail trader on WSB likes to think that all of these major players are in cahoots with one another, working together to take money away from them. But WSB itself has different traders trying to pull their money out at the peak while at the same time they are telling others to buy more. The congressional hearing with the hedgies, Robinhood's CEO and the primary leader of WSB was supposed to pull out some of the truth… but in the end there was no real clarity.
Fast forward to Feb 24th and this whole saga seems to be continuing. I'm curious to find out which reality is true. At the end of the day, I didn't control as much information as I thought I did. I sold my shares for a bit of a loss. It is possible to recreate the "absolute truth" after an event has taken place, and I'm curious what comes of that process. Redditors, unsurprisingly, are hoping for many people to be thrown in jail and Netflix already bought the rights to make a movie about the whole ordeal.
This saga reinforces the fact that perception is the worlds most powerful asset.