HOLY COWWWW!!! Shall We Call It A Revolution?! Or What?!

Grab a seat.

You gon need one. This one?

Yea, you’re getting edu-ma-cated for shizzle! Read on.

Even the most ‘I-don’t-care-about-the-stock-markets’ person heard the news. I mean, just wow. It bled everywhere! What are we talking about? The big-whole short squeeze. [Get that juxtaposition?] Yep, the history, the battle and the results, coming up right… about..

…N N N Nowww

Where Do We Pick Up From?!

GameStop (GME)

Or more like Institutional Investors Vs. Retail Investors

What a week in the history of the markets! A chaos, a saga, a revolution …does not begin to define what happened but jumping into it without further ado.

How It Started

In April of 2020, Dr. Michael Burry, a hedge fund manager at Scion Asset Management, disclosed the firm bought 5.3% of video game retailer, GameStop, at between $2 and $4.2 per share, spending about $15 million in total. [like it’s just another day on wallstreet…] The hedge fund wanted GameStop to use its cash to buy back stocks. At this time, GameStop’s entire market cap was just $300 million and Burry called for the company to exhaust its $300m on buyback authorization. #WorldPeople Not Cool, Dr. Burry, Not Cool!!!

In response, GameStop lowered its outstanding shares by 38% by buying back about $200 million in stocks since 2019. The GME drama, also fueled by the decline in in-store video games sales, was supposed to end in 2020 as one of the world’s most heavily shorted stocks.

But you see, when God shows up for you ehn? Superman has nothing on it …and so it began. A 2-million-people Reddit group got involved. They declared a war!! This group consists of individual investors like you and I but with the power of the collective. They had only one mission: an upward movement of GME share price. They utilized forums like Reddit’s WallStreetBets to [you-know] “keep each other warm.”

So What Happened

As the stocks skyrocketed, some day traders profited and some hedge funds with short bets against the companies (now including AMC, etc.) suffered losses. [E Choke Ooo] This dynamic created a short squeeze, where heavy stock buying forces short bettors to buy shares of the stocks to limit their losses, therefore increasing the stock price even more.

Elon Musk joined the party, and as you can imagine, with tens of millions of avid fans worldwide and a knack for moving stocks with a single inscrutable tweet, Musk simply wrote, “Gamestonk!!” [Mad Thing]. Needless to say, the GME stock jumped 43% in after-hours trading. On Wednesday, GameStop continued it’s climb, rising 130% to over $360 a share.

Money? Time? Energy? WallStreet Bets!

Without diving into too much history about where this Reddit group emanated from, the group got a huge spike in number thanks to stay-at-home Covid guidelines: folks had loads of free time and stimulus cheques, plus a volatile market to play around with.

The Heat of the Battle

..and so trading platforms & brokers began to feel the heat of the volume and price movement…! And the decisions to halt purchases rolled in: Restricted purchases on several stocks including GME & AMC. [Like a comedy show, I grabbed my popcorn and zobo.. Is this real life? Or are we getting gamed?] Appaz, this might [just might] be a paradigm shift.

This update left traders with just two choices: hold or sell. Selling off at such a critical point will cause a high drop in price and give hedge funds the opportunity to buy more stocks to pay back their shorted stocks.. So kinda means they’d win.

WallStreetBets (WSB) caught wind of this news (although it might have hit them like a wrecking ball) and the battle proved far from over. They took to social media with the hashtag “HOLD THE LINE,” don’t sell your shares! [No Be Small Thing, my brava]

This means what? WARRRRRR!!!!

White House Be Like:

Okay, “we just gon save our extra stimulus cheques because you lots have wayyyy too much money on your hands, moving the markets like so and ermm [movie week it is?]” White House Treasury Secretary, Janet Yellen, said officials were “keeping an eye” on the frenetic trading activity.

So Now What?! What Does Monday Hold?

By Jan. 27, the most-shorted stocks still accounted for only 0.17% of the S&P 500. They did roughly double to 8.6% of the S&P 600 Small-Cap index and 11% of the Russell Microcap index. However, investors who are well diversified aren’t likely to feel a major impact. As for monday? Hold Tight, we’d have to see!

The Big Catch:

With many retail investors still holding their shares, hedge fund managers will have to find a way to repay their already expired shorts without going bankrupt.

Wahala for Hedge Fund way get shorts o

Was this the end Reddit’s WSB group was looking for? Did retail investors “triumph” over institutional investors? The horror movie continues.

With tweets randomly popping up and folks stating their new statuses as millionaires literally from this week’s run-up, perhaps, not everyone’s story will end in HOT tears.