Ok, some of you are probably asking: what the hell is going on with GameStop? How did its market price go from 5 dollars to 500 in a few months? What is a stock market? How money work help plz?!
Alright, well, let me briefly explain now that you probably are seeing mainstream media start their siren machine on an old narrative that they have been essentially keeping under the rug for numerous years…
First, let’s consider that our beloved GameStop has found its way out of bankruptcy and with new management, lots of awesome possibilities can transform the way this company works on a fundamental level. From speculation to reality, one can consider GS going strong into the gamer community, even holding tournaments between store regions and creating a whole new type of entertainment value, as well as possible rumored crypto connections. But don’t hold your breath; nothing is written in stone yet.
Now, how the heck did the price for one share of GSE (the stock symbol for GameStop) go from $5 to nearly $500 in such a short amount of time? Is the company doing that great?? The simple answer is no. The complicated answer involves corrupt bankers and hedge funds over-leveraging their market-making tools… So… let me guide you through some market basics.
TL;DR
People in suits thought GameStop was a dead company.
They sold shares early at a higher price to buy later at a lower price for profit.
Public got fed up with these rich bastards.
Public pushes price higher.
Suits start sweating bullets due to huge monetary losses (over $7 billion since January).
The war rages on as I am writing this.
AMC Theatres is the next target based on countless streamers and forums, and was even identified as 100/100 short squeeze risk on Fox Business.
Edited:
Companies involved first round: GME (01/2021), AMC (06/2021), BBIG, CLOV, BBBY, BlackBerry
Second round currently developing (03/2022): GME, AMC, BBBY, MULN, ATER
What is a share?
At its base, consider a share a piece of official paper that gives you part ownership of a company. If you own 51% of a company’s shares, you can essentially call all the shots (Look at Michael Cohen and GSE).
But what is a share?
Nothing really; just like paper money, it’s paper… with a set value target… that inflates. So realistically, it’s nothing, but our economic system decides that we can buy and sell (exchange money for shares) so thus we enter the stock market exchange.
The GameStop Gamble
What happened with GSE shares?
Simple, yet complex… so let’s consider the simple factor:
Imagine you have a Charzard Holographic Pokemon card that’s worth 1,000 dollars on the market, but you have no intention of selling it. So I come by (as a hedgefund/banker/suit/shill) and ask if I can “borrow” that card for a week. You say, “Sure as long as it’s in the exact same condition” and I pay you $25 per day of lending. I agree. (Enter the “short selling” concept).
So of course I want to “borrow” your Charzard card not to just stare at it for a week, but because I heard that the price will drop because more cards of this exact kind will be released at the end of the week, thus reducing its value due to increased supply. So I immediately sell “your” card on the market for $1000—its market value.
Scenario One:
6 days later, I waited for the price to drop, and sure enough thousands of new Charzard cards were printed and one card now costs 300 dollars! Hooray! I sold it for $1000, bought it back for $300, and paid you $25 per day (*6 days = $150) and actually made profit! 1000 – 300 – 150 = 550; not bad, huh?
Well yes, this happens with shares as well, called short selling, but now imagine…
Scenario Two:
If more cards never were printed, in fact what if they found out there were far less Charzard cards than initially counted on the market… so now the whole narrative is flipped. That card I sold for $1000 six days ago is now $5000… but I can’t just not return it… what if you were a Mafia boss ready to break my knees and I’m not a fan of sleeping with the fishes (too salty)?
So now I legally HAVE to buy it back for $5000 to return the card back to you. Got it? Good. Now multiply one Charzard by millions of shares that were borrowed and never returned. Starting to get the picture?
So maybe now you can see what happened when hedge funds thought GameStop would go from 5 dollars to 4…3…2…1…0, dead. Why even bother writing papers for a $0 company? You can just clear out all the borrowed shares because they are worthless… well… not when the reddit community took a sniff. You can start seeing how all this became a losing gamble for the suits and ties.
The Public Backlash
It started with a forum, then it continued to streaming, and recently to mainstream news media… the Naked Shorts were in main focus. (No, not see-through trousers).
As the general public started buying up the shares, the price increased, forcing hedge funds to hold on to their contracts for borrowed shares, praying on their knees that the price will go down below 5 again… but so far their greasy pressed hands did them no service. Due to obvious historic repetition, remember the 2008 crash? Yeah, basically same thing as above, just real estate.
In fact, after 2008, the government made naked shorts (fake shares being sold) illegal, so the subject has now grown into the airwaves of the masses.
Conclusion
As I am writing this, I can’t say that I am also invested in this sporadic event, but I can say that I would never not let an opportunity like this go by. Though it is a very risky bet, it has been bearing fruit so far, like lots of green fruit. Man, it’s almost surreal.
But with a pissed-off public watching their tax money used to bail out gambling men in suits, I am not in the least surprised capitalism finally approaches a re-balancing of justice to those that were pushed to the side and used for bailouts.
