Wall Street & Social Media

[Basileos Leandros I]

As many of you probably know by now, as it has been plastered all over traditional media (TV / newspapers) lately, there's full blown "war" between social media, namely Reddit, and Wall Street, over a number of stocks. We're looking particularly at GameStop here (GME), but also at AMC, Nokia and even BlackBerry that have been significantly impacted.

The gist of it is rather simple - a hedge fund has shorted (bet on lowering of the price) GameStop, considering it a falling retailer and rather close to bankruptcy. They shorted 140% of the shares (more than available shares), Wallstreet Bets (Reddit) has latched on to it and pushed GameStop up from about 5-6 dollars a share to about 350 dollars yesterday. This led to the hedge fund Melvin Capital losing hundreds of millions of dollars on their positions, which attracted even more attention and pushed the GameStop stock even higher.

This new legion of day traders, equipped with free trading platforms, spare cash, and boredom, has set its sights on a growing list of US-listed companies over the past several weeks.

GameStop, a games retailer whose shares have been sent flying by gangs of traders co-ordinating moves on Reddit, sits at ground zero of a battle that has shown these have-a-go investors are no longer just a sideshow.

https://www.ft.com/content/56e8b33a-...b-327ef54c4d5a

This is a very interesting bit we're living in right now. Essentially market manipulation - but this time it's not done by Wall Street, it's done by retail investors. But the interesting part is that it turned into a serious social battle, a kind of Occupy Wall Street, except this time played directly into the market. Elon Musk & many other well known businesspeople chimed in, some heavily supporting Wallstreet Bets (like Musk), pushing stocks of those companies even higher because of this.

Thoughts?

Or even better - have you invested? To the moon?

P.S: Gimme them tendies!

[antaeus]

Not many thoughts just yet.

But a tiny Western Australian mining company has been making hay while the sun is shining. They have the same listing code on the Australian Stock Exchange as GameStop does on the NYSE and excited investors will be excited...

https://www.smh.com.au/business/comp...28-p56xh4.html

[Aexodus]

The WSB saga is absolutely brilliant and I hope they keep going.

Whatever comes through that gate, HOLD

[Infidel144]

Can they keep going? I saw something about WSB getting deplatformed because racism or some such.

[PointOfViewGun]

How did the redditers know that the fund manager was shorting the stocks?

[Basileos Leandros I]

How did the redditers know that the fund manager was shorting the stocks?

Melvin Capital has a history of bragging about their positions. They bragged about it in public that they're shorting Tesla, which led to Musk tweeting yesterday his support of GameStop.

https://www.marketwatch.com/story/he...nbc-2021-01-27

[Pontifex Maximus]

This has been the best news I've seen in a while. The oligarchs are already shutting it down pretty firmly however. Can't have those filthy normies exploiting the things they've been exploiting for decades.

[Love Mountain]

Forbes

This is a serious issue and I hope that FTC leads a very detailed inquiry into this. Other traders also shut down or paused trading for GME. This stinks of insider trading and if it is, I hope they put them all in jail and make an example of them. Nobody should be above the law, especially the people playing with economic levers.

How did the redditers know that the fund manager was shorting the stocks?

I don't think they originally did, but someone noted the significant changes in short data and interest. Turned out that a lot of funds were massively overleveraged on this particular stock.

[Pontifex Maximus]

They obviously got to the Robinhood people to stop the hurt at its source. At what point will they be forced to admit its only a free market for the top 1%?

[Love Mountain]

Slow down there Trotsky. Robin Hood is particularly interesting because it relies on having a relationship with firms like Melvin and Citadel. It's Melvin and Citadel who make Robinhood's services even possible. Though, thankfully, almost right on queue, RobinHood was immediately served. Impressive response time.

Of course I find the whole narrative of Reddit turning the tables on Wall Street as a sort of "People's Crusade" absolutely hilarious. I've lurked on r/WSB for a long time and the only thing people on there care about is money, making memes about money, and trying to intellectually flex on each other. Which is the exact same kind of environment you will find at any hedge fund.

[Pontifex Maximus]

I always knew the lawyers would save us. Of course Melvin & friends found a way to skim off the top by providing some measure of access, it's their nature to as middlemen. Maybe the issue here is more philosophical at this early stage than anything else as far as my visceral reaction.

Which is the exact same kind of environment you will find at any hedge fund.

So maybe there are some hens in the fox house and some fox in the hen house. There have been a number of stories of normies coming into 20k to pay off student loans, buy a house etc. And they do sort of fit the neckbeard stereotype.

[Surgeon]

Hedge funds apparently lost 70+ billion. This's been like a slo-mo car wreck. Lemme guess, media is going to say this was caused by homophobe misogynist white supremes from Gamergate.

"How taking money from the 1% hurts black trans womxn" -- Vice, probably

[Pontifex Maximus]

Already there.

To quote redditor blunt_person: "We can remain retarded for longer than they can stay solvent"

[Lord Thesaurian]

Forbes

This is a serious issue and I hope that FTC leads a very detailed inquiry into this. Other traders also shut down or paused trading for GME. This stinks of insider trading and if it is, I hope they put them all in jail and make an example of them. Nobody should be above the law, especially the people playing with economic levers.

I haven’t seen any evidence of that so far. It’d be one thing if all GME trading was suspended on the platform, trapping retail buyers while the big fish sell off and salvage their short positions. As far as I know though, people can still sell, they just can’t buy. It’s common for that sort of thing to be triggered on an individual basis due to the pattern day trading restrictions platforms like Robinhood put in place to protect amateur users (that is, people with a net account balance under a certain threshold) from themselves. That is to say, the platform already applies “purchase freezes” to individual people under certain circumstances that are considered risky to users but not illegal, no conspiracy required.

Looks like Robinhood took the liberty of applying similar logic to GME as a whole, though short sellers will continue to lose money so long as enough buyers hold their positions, while the professional traders caught in the middle of this mess could always eat their losses and close their short positions, which some hedge funds have done already. It’s still the same game of chicken at this point, and if an investigation does reveal by sheer chance that trading platforms like Robin Hood had their thumbs on the scales to illegally help Wall St beat back Main St, it’d deal huge reputational damage to these platforms that market themselves as a sort of high interest savings account for the everyman’s spare change, not to mention very difficult to prove. More likely though, is that Congresspeople are weighing in on yet another viral trend to stay relevant, without actually understanding the accusations they’re making about nefarious “purchase freezes” that happen all the time on an individual basis and at the discretion of the platforms in question.

As we're seeing, stopping the party early has its consequences too. The public will, with good reason, wonder or believe that RobinHood is cutting off investors while they're in the middle of a winning streak, and during a rare time when Main Street is beating Wall Street. Perhaps the company is doing it to protect its Wall Street owners. Or maybe it's just another case of Main Street being unable to catch a break.

But this is probably a damned-if-you-do, damned-if-you-don't situation. It's easy to imagine a scenario where RobinHood lets things play out on their own, and for all we know stocks like GameStop might have doubled or tripled from here. But inevitably, whenever this trend ended, there would be stories of working parents who bought call options because they saw everyone else doing it and lost everything, or people thrown out of work as the bursting bubble had broader economic consequences. Why, members of Congress will ask, were inexperienced retail investors allowed to speculate in complex derivative contracts at all? So while these preemptive decisions may result in negative consequences for RobinHood and others, the bursting of a bigger bubble would be worse.

RobinHood did the right thing here, but they shouldn't expect any thank you's.

https://www.bloombergquint.com/gadfl...rom-themselves

[Love Mountain]

I haven’t seen any evidence of that so far. It’d be one thing if all GME trading was suspended on the platform, trapping buyers while the big fish sell off and salvage their short positions. As far as I know though, people can still sell, they just can’t buy. It’s common for that sort of thing to be triggered on an individual basis due to the pattern day trading restrictions platforms like Robinhood put in place to protect amateur users (that is, people with a net account balance under a certain threshold) from themselves. That is to say, the platform already applies “purchase freezes” to individual people under certain circumstances that are considered risky to users but not illegal, no conspiracy required.

This isn't a normal thing. Robinhood themselves put out a statement on why they froze all buying, citing "volatile conditions". Which is awfully convenient for the people they do business with. This may very well be all innocuous and responsible, but a lawsuit has been filed and we may very well know if there was foul play involved or not. The circumstances and initial apperance is not very good, to say the least.

Looks like Robinhood took the liberty of applying similar logic to GME as a whole, though short sellers will continue to lose money so long as enough buyers hold their positions, while the professional traders caught in the middle of this mess could always eat their losses and close their short positions, which some hedge funds have done already. It’s still the same game of chicken at this point, and if an investigation does reveal by sheer chance that trading platforms like Robin Hood had their thumbs on the scales to illegally help Wall St beat back Main St, it’d deal huge reputational damage to these platforms that market themselves as a sort of high interest savings account for the everyman’s spare change, not to mention very difficult to prove. More likely though, is that Congresspeople are weighing in on yet another viral trend to stay relevant, without actually understanding the accusations they’re making about nefarious “purchase freezes” that happen all the time on an individual basis and at the discretion of the platforms in question.

I think the name RobinHood may turn out to be massively ironic if revelations reveal an ugly truth.

[Pontifex Maximus]

I think the name RobinHood may turn out to be massively ironic if revelations reveal an ugly truth.

The massive irony is already present lol

[Lord Thesaurian]

This isn't a normal thing. Robinhood themselves put out a statement on why they froze all buying, citing "volatile conditions". Which is awfully convenient for the people they do business with. This may very well be all innocuous and responsible, but a lawsuit has been filed and we may very well know if there was foul play involved or not. The circumstances and initial apperance is not very good, to say the least.

I think the name RobinHood may turn out to be massively ironic if revelations reveal an ugly truth.

It’s not that preventing people from buying a specific stock is normal, it’s that “purchase freezes” can happen to individual users all the time under certain, common circumstances at the discretion of platform rules that have nothing to do with the law or financial regulations (pattern day trading restrictions was one example given). The point is that “purchase freezes” in and of themselves are not indicative of any potential wrongdoing on the part of these trading platforms, contrary to swirling accusations, and to prove that Robinhood did something within their rights for nefarious or illegal reasons would be very difficult to do. This has already been pointed out:

“I’m looking at the Robinhood contract, and it says in black and white they can block or restrict trades at any time,” said Jeff Erez, who runs a Miami-based law firm specializing in securities-fraud litigation and represents plaintiffs in a lawsuit filed last year against Robinhood related to service disruptions. “I’m not aware of any law that would guarantee you a right to purchase a certain security at a certain brokerage firm.”

Brokerages are permitted broad discretion in limiting trades to provide flexibility in handling unusual situations like technical glitches, mechanical errors and mistakes, or to preserve an orderly market, said Columbia Law School professor Joshua Mitts, who specializes in corporate law.

“There is no obligation that a broker-dealer has to unconditionally accept orders to buy, sell or short-sell securities,” said Cam Funkhouser, a former executive at the Financial Industry Regulatory Authority, a Wall Street-backed regulator that oversees broker-dealers. “If they do accept orders, it is expected that the transaction is executed and settled in compliance with the applicable rules,” said Funkhouser, who worked at Finra for 35 years and oversaw its national fraud-detection office.

The lawsuits “are likely subject to dismissal based on customer agreement language,” said Elliott Stein, a senior litigation analyst at Bloomberg Industries.

https://finance.yahoo.com/html/news/robinhood-customers-sue-over-removal-164733860.html

The evidence so far suggests it’s more likely Robinhood is stepping in at their discretion and within their rights in order to protect the firm from greater blowback in the event of users losing their shirts, especially after the bad press from even a single user killing himself because he didn’t understand how the platform works last year. The gripe I have with frivolous accusations from lawmakers is that it’s alot of misinformation from people in power who have a responsibility to understand what they’re talking about before jumping on the social media bandwagon.

[Love Mountain]

It’s not that preventing people from buying a specific stock is normal, it’s that “purchase freezes” can happen to individual users all the time under certain, common circumstances at the discretion of platform rules that have nothing to do with the law or financial regulations (pattern day trading restrictions was one example given). The point is that “purchase freezes” in and of themselves are not indicative of any potential wrongdoing on the part of these trading platforms, contrary to swirling accusations, and to prove that Robinhood did something within their rights for nefarious or illegal reasons would be very difficult to do. This has already been pointed out:

The evidence so far suggests it’s more likely Robinhood is stepping in at their discretion and within their rights in order to protect the firm from greater blowback in the event of users losing their shirts, especially after the bad press from even a single user killing himself because he didn’t understand how the platform works last year. The gripe I have with frivolous accusations from lawmakers is that it’s alot of misinformation from people in power who have a responsibility to understand what they’re talking about before jumping on the social media bandwagon.

Brokerages have pretty broad leeway in limiting trades. Whether this is unusual or not, is not really relevant, in my opinion (though it is extremely unusual to prevent an entire userbase from trading on a single stock to the benefit of Robinhood's partners). However, this broad leeway is not limitless and it is certainly not above reproach. Even something as mundane as filing practices can be scrutinized, fined, and settled on. While Robinhood may certainly claim that they are "protecting" their userbase, their actions are benefiting their partners, who stand to lose billions if the current trend goes on. Circumstantial evidence is suggesting foul play rather than any genuine concern for their userbase. That said, the plaintiffs certainly face a high legal bar, as Robinhood can halt trades for any reason.

I understand that Robinhood may, in its discretion, prohibit or restrict the trading of securities, or the substitution of securities, in any of My Accounts

One thing to keep in mind however, is that even if the lawsuit fails, there is absolutely nothing to stop the SEC from investigating and determining that Robinhood did something shady and illegal, and order them to pay damages. The SEC has extremely broad powers, and the current Attorney for SDNY is no friend to the finance industry.

[Gaidin]

Now that Robinhood has cut off access to something like at least five stocks...the situation is summed up as such:

Rich People: wHy dOn'T tHe pOoR jUsT iNvEsT tHeIr mOnEy
Poor People: Ok.
Rich People: ...
Rich People: wait stop

[irontaino]

Now that the stock market has been shown to be just as pretend as astrology, maybe we should stop using it to gauge how well the economy is doing. For my part, I managed to get some stonks before they got too high and got cut off by Robinhood. Been kicking back and laughing as billionaire hedge fund managers lose money.