GME - Game Stop Corp

[hasilp89]

The question i have is what keeps the extreme price elevated? I get the spike higher. I don’t understand how the price says elevated, like Tesla, apparently permanently :-)

 

How long do people expect prices to stay elevated?

 

And is the phenomenon just getting started? Will it keep morphing to more and more stocks?

 

PS: i am not asking because i am looking to jump in :-) i will leave that up to those smart (or dumb) enough to...

Rather, i am just trying to get a handle on this phenomenon. Is it here for a month? Or possible a year or longer :-)

 

 

I’m not sure if this correct but it’s how I understand it. And I’m using rough / simple numbers that may even be inaccurate as I’m not sure what SI/float numbers to trust.

 

There are 60m shares short and 50m shares floated. As long as the retail buyers (eg wsb 6m) and other longs continue to hold and not sell into an aggressive decline (either they keep buying back and forth from each other or literally holding to the moon) then the price would only increase / stay flat as demand would be pushed up as shorts have to cover and the retail demand grows. This is on top of all the wild option volatility which forces buying, ga,ma squeees and technicals I don’t fully understand. But 6m retail investors 50m shares each one doesn’t need to hold that much right.

 

Technically they’d stay elevated as long as current holders don’t capitulate. On the wsb boards they discuss holding strong, not being scared by the hedge funds fear tactics (short ladder attacks, CNBC running adds that Melvin is out etc). It’s a game of chicken.

 

While Melvin said it covered maybe they were short at $10, and the new shorts are short at $300 and they can pay the daily interest for months while trading the volatility on the options and not face margin calls. The game of chicken will be interesting. Another thing is that the60m number comes from bimonthly reporting. The next report is out feb 9 with month end Jan data. Various providers give daily data (based on what I don’t know). So if that number holds or increases it could encourage retail holders to get more aggressive, but things could go the other way. 

 

I’m not an expert on this stuff so please correct me if anything you see is inaccurate. I’ve only ever been a struggling chapter 8&20 fellow and ignored this situation for a long time until I though it’d actually be interesting to learn what’s going on vs. raising my chin.

 

Also take a look at the arbitrage section of the 1988 BRK letter, interesting perspective from a 24 year old WEB that it isn’t always about P/E. Our hero wasn’t always sitting around thinking about moats and doing DcFs in his head.

 

[hillfronter83]

That’s what I don’t understand. If I’m GME I’m on the phone with Melvin et al offering to clear their short position for a 50% discount to market.

 

GME Q3 10-Q indicates 300m share authorized. Does that mean company can issue about additional 230m shares without needing shareholder approval? But why would you issue at 50% discount instead of 50% premium when shorts are desperate?

[StubbleJumper]

That’s what I don’t understand. If I’m GME I’m on the phone with Melvin et al offering to clear their short position for a 50% discount to market.

 

 

The directors and executives will want to blast their shares out the door to take care of their own personal financial interest before issuing shares which would be in the company's financial interest.  Some of the directors have been liquidating.  It's really a no-brainer for the directors who have been holding 100,000 shares to take the opportunity to cash-out.

 

But, yes, once management and the board has cleaned out their holdings, the rational step would be to issue a few billion dollars worth of shares and then go shopping for some decent assets.

 

 

SJ

[aws]

Did anyone follow the saga of DGAZ last year?  It was a 3x inverse ETF on natural gas that got delisted, and it was a popular short as it was an ETF trading well above its NAV.  For a while it bounced around $300-600 while the NAV was something like $100.  Then over the course of a week it went to 2000, then 6000, then 25000.

 

I believe the problem was that more than 100% of the stock was held by the issuer internally.  It was a delisted security and basically just in run-off mode and the issuer didn't care at all about the price and was never selling any shares no matter how overvalued they got.  So you had something like 110% of the shares locked up, 40% held my individuals, and -50% held by short sellers.  After a while of trading back and forth at like 3x IV, the final explosion higher in price happened as there were literally not enough shares available for all the shorts to cover, and the price went to the moon. 

 

Now the DGAZ saga ended well for short-sellers, as the issuer liquidated the fund at the $100 NAV and bailed out the short sellers holding shorts of shares marked in the five figures dollars per share.  But no liquidation is going to bail out GME shorts.  Reading some of the comments about people in the GME trade about how they refuse to sell no matter what the price and how they want to send a message, now it starts to feel more like DGAZ than the other short squeezes of the past. With over 100% of the float still short and few of the longs interested in selling, it could be far from over.

 

If they are really going to hold these shares no matter what, and the demand is further bolstered by the ridiculous amount of press coverage the trade has gotten this week, then who's to say how crazy it gets.  All the new shorts who are jumping in to replace the old ones, hoping to capitalize on the inevitable crash, could trigger a cascade of liquidation as the price raises higher and they are forced out.  So it will continue to be a battle of wills for the longs to hold regardless of the overall price level, daily swings, trade restrictions, or whatever else is thrown at them.

 

It's interesting to watch, and while I am not participating directly on the long side, I wouldn't touch a single short share or short call option on this one.

[hasilp89]

 

If they are really going to hold these shares no matter what, and the demand is further bolstered by the ridiculous amount of press coverage the trade has gotten this week, then who's to say how crazy it gets.

 

Thanks for sharing that, I had not heard of it but yes the technicals sound similar aside from the fact that GME will not be liquidating - unless an equity issuance would cause it?

Like you said with DGAZ. Because the long retail holders are so decentralized ppl are holding with no effs given if it goes to zero. It’s 1 share here 10 shares there. They may loose $350 but they doing it to make a point. Does it add up with 6 million apes buying into it. Maybe...

[compoundinglife]

One of the obvious observations I have from the GME saga is how hard it is to determine what the short interest actually is on a highly shorted stock. You have companies like S3 that build products and systems just to figure this out. It seems like the root cause of this is the T+2 settlement lag. This creates a huge hole for naked shorting and probably other nefarious activity. Even getting the settlement time down to EOD would be a big improvement. I don’t think real time settlement is possible any time soon given the volume (HFTs etc...). It appears options are settled same day, why is the DTCC still living in the Stone Age? Am I missing something? Or is it just sloth.

[WneverLOSE]

One of the obvious observations I have from the GME saga is how hard it is to determine what the short interest actually is on a highly shorted stock. You have companies like S3 that build products and systems just to figure this out. It seems like the root cause of this is the T+2 settlement lag. This creates a huge hole for naked shorting and probably other nefarious activity. Even getting the settlement time down to EOD would be a big improvement. I don’t think real time settlement is possible any time soon given the volume (HFTs etc...). It appears options are settled same day, why is the DTCC still living in the Stone Age? Am I missing something? Or is it just sloth.

 

It is very possible to have instant (in human time scale, in computer time scale obviously it won't be 'instant' but would take a few microseconds) settlement even today, the reason it is not like that is netting, netting is the concept that you don't have to change the ledger every time a trade is done and if in the mean time offsetting transactions occur you don't need to register them at all, netting is done to lower the cost of trading since millions of transactions can be netted and there would be only one lump some of money transferred between the brokers instead of millions of cash payments for really small sums.

 

[compoundinglife]

One of the obvious observations I have from the GME saga is how hard it is to determine what the short interest actually is on a highly shorted stock. You have companies like S3 that build products and systems just to figure this out. It seems like the root cause of this is the T+2 settlement lag. This creates a huge hole for naked shorting and probably other nefarious activity. Even getting the settlement time down to EOD would be a big improvement. I don’t think real time settlement is possible any time soon given the volume (HFTs etc...). It appears options are settled same day, why is the DTCC still living in the Stone Age? Am I missing something? Or is it just sloth.

 

It is very possible to have instant (in human time scale, in computer time scale obviously it won't be 'instant' but would take a few microseconds) settlement even today, the reason it is not like that is netting, netting is the concept that you don't have to change the ledger every time a trade is done and if in the mean time offsetting transactions occur you don't need to register them at all, netting is done to lower the cost of trading since millions of transactions can be netted and there would be only one lump some of money transferred between the brokers instead of millions of cash payments for really small sums.

Thanks for the response.

From a computing/distributed systems perspective I agree near real time is possible. But still a very hard problem. We know how to build these systems in practice but in reality it’s hard to build them correctly. But not saying it can’t be done.

 

But I think daily or bi daily settlement gets us much better visibility. Less intrusive of a change. And firms can still net or batch, just more often. I am sure they can deal with that. I guessing that netting happens on a daily basis today but the lag to settle the netted transactions is T+2. Reducing the 2 to T+(EOD-T) would be a big step.

[SharperDingaan]

That’s what I don’t understand. If I’m GME I’m on the phone with Melvin et al offering to clear their short position for a 50% discount to market.

 

GME probably did. But it was more along the lines of an offer than you cannot refuse - a quite reasonable 125% above closing price, or we make you poor. Melvin told them to PFO, and got a horse head on their doorstep. Oops!

 

There will eventually have to be a share issuance, and it will be under regulatory pressure.

Were I the treasurer, I'd be asking for 175% of market plus, so as to average out at near the current market price net of dilution. Got to protect our friends, we weren't the stupid, and if you want to remain in this industry .... regulators will make you cough up. Gun against both kneecaps this time, to dissuade the stupid.

 

It's a generational Woodstock moment, underscoring the muscle of decentralized finance.

The players can either be graceful about it, or use a wheelchair, their choice. We're all for grace  :)

 

SD

 

 

 

 

 

[Spekulatius]

One of the obvious observations I have from the GME saga is how hard it is to determine what the short interest actually is on a highly shorted stock. You have companies like S3 that build products and systems just to figure this out. It seems like the root cause of this is the T+2 settlement lag. This creates a huge hole for naked shorting and probably other nefarious activity. Even getting the settlement time down to EOD would be a big improvement. I don’t think real time settlement is possible any time soon given the volume (HFTs etc...). It appears options are settled same day, why is the DTCC still living in the Stone Age? Am I missing something? Or is it just sloth.

 

It is very possible to have instant (in human time scale, in computer time scale obviously it won't be 'instant' but would take a few microseconds) settlement even today, the reason it is not like that is netting, netting is the concept that you don't have to change the ledger every time a trade is done and if in the mean time offsetting transactions occur you don't need to register them at all, netting is done to lower the cost of trading since millions of transactions can be netted and there would be only one lump some of money transferred between the brokers instead of millions of cash payments for really small sums.

Thanks for the response.

From a computing/distributed systems perspective I agree near real time is possible. But still a very hard problem. We know how to build these systems in practice but in reality it’s hard to build them correctly. But not saying it can’t be done.

 

But I think daily or bi daily settlement gets us much better visibility. Less intrusive of a change. And firms can still net or batch, just more often. I am sure they can deal with that. I guessing that netting happens on a daily basis today but the lag to settle the netted transactions is T+2. Reducing the 2 to T+(EOD-T) would be a big step.

 

China has already T+0 settlement in HK ( China connect):

https://www.globalinvestorgroup.com/articles/3693040/overcoming-the-t-0-settlement-cycle-in-china

 

FWIW, the problem with Robinhood was that they settles the trades themselves and apparently the mushrooming trading and stock prices caused an increase in capital requirements. In a way, it’s a high class problem to have and that’s why they were able to raise $1B in capital that quickly.

[TwoCitiesCapital]

Wouldn't GME issuing shares to the shorts, or even to the open market, just fuel the narrative the deck is stacked against the little guy? It doesn't matter that the shorts have lost billions because the share offering would prevent them from losing more billions while tanking the share price for the retail traders who were long the stock.

 

Not sure GME wants it's legacy to end that way

[compoundinglife]

Wouldn't GME issuing shares to the shorts, or even to the open market, just fuel the narrative the deck is stacked against the little guy? It doesn't matter that the shorts have lost billions because the share offering would prevent them from losing more billions while tanking the share price for the retail traders who were long the stock.

 

Not sure GME wants it's legacy to end that way

 

They could do an issuance with low limit per subscriber. No one entity can subscribe for than X. It actually suited the current WSB situation really well. The community can continue to support the stock and they probably have enough people to take whole share sale even at low per subscriber allocations.

 

 

[rb]

One of the obvious observations I have from the GME saga is how hard it is to determine what the short interest actually is on a highly shorted stock. You have companies like S3 that build products and systems just to figure this out. It seems like the root cause of this is the T+2 settlement lag. This creates a huge hole for naked shorting and probably other nefarious activity. Even getting the settlement time down to EOD would be a big improvement. I don’t think real time settlement is possible any time soon given the volume (HFTs etc...). It appears options are settled same day, why is the DTCC still living in the Stone Age? Am I missing something? Or is it just sloth.

 

It is very possible to have instant (in human time scale, in computer time scale obviously it won't be 'instant' but would take a few microseconds) settlement even today, the reason it is not like that is netting, netting is the concept that you don't have to change the ledger every time a trade is done and if in the mean time offsetting transactions occur you don't need to register them at all, netting is done to lower the cost of trading since millions of transactions can be netted and there would be only one lump some of money transferred between the brokers instead of millions of cash payments for really small sums.

Thanks for the response.

From a computing/distributed systems perspective I agree near real time is possible. But still a very hard problem. We know how to build these systems in practice but in reality it’s hard to build them correctly. But not saying it can’t be done.

 

But I think daily or bi daily settlement gets us much better visibility. Less intrusive of a change. And firms can still net or batch, just more often. I am sure they can deal with that. I guessing that netting happens on a daily basis today but the lag to settle the netted transactions is T+2. Reducing the 2 to T+(EOD-T) would be a big step.

The problem isn't on the stock side, the problem is on the cash side. Cash has to move from one party to the other an the cash rec departments at most FIs are just crap.

[rb]

Did anyone follow the saga of DGAZ last year?  It was a 3x inverse ETF on natural gas that got delisted, and it was a popular short as it was an ETF trading well above its NAV.  For a while it bounced around $300-600 while the NAV was something like $100.  Then over the course of a week it went to 2000, then 6000, then 25000.

 

I believe the problem was that more than 100% of the stock was held by the issuer internally.  It was a delisted security and basically just in run-off mode and the issuer didn't care at all about the price and was never selling any shares no matter how overvalued they got.  So you had something like 110% of the shares locked up, 40% held my individuals, and -50% held by short sellers.  After a while of trading back and forth at like 3x IV, the final explosion higher in price happened as there were literally not enough shares available for all the shorts to cover, and the price went to the moon. 

 

Now the DGAZ saga ended well for short-sellers, as the issuer liquidated the fund at the $100 NAV and bailed out the short sellers holding shorts of shares marked in the five figures dollars per share.  But no liquidation is going to bail out GME shorts.  Reading some of the comments about people in the GME trade about how they refuse to sell no matter what the price and how they want to send a message, now it starts to feel more like DGAZ than the other short squeezes of the past. With over 100% of the float still short and few of the longs interested in selling, it could be far from over.

 

If they are really going to hold these shares no matter what, and the demand is further bolstered by the ridiculous amount of press coverage the trade has gotten this week, then who's to say how crazy it gets.  All the new shorts who are jumping in to replace the old ones, hoping to capitalize on the inevitable crash, could trigger a cascade of liquidation as the price raises higher and they are forced out.  So it will continue to be a battle of wills for the longs to hold regardless of the overall price level, daily swings, trade restrictions, or whatever else is thrown at them.

 

It's interesting to watch, and while I am not participating directly on the long side, I wouldn't touch a single short share or short call option on this one.

The things is that there are a lot of shares available because GME can issue them and eventually will. It's very similar to what happened last year when the same idiots were pumping the shares of Hertz while in bankruptcy. Hertz filed for an issuance. That time the SEC stepped in to stop them. I don't think the SEC steps in this time.

[rb]

Wouldn't GME issuing shares to the shorts, or even to the open market, just fuel the narrative the deck is stacked against the little guy? It doesn't matter that the shorts have lost billions because the share offering would prevent them from losing more billions while tanking the share price for the retail traders who were long the stock.

 

Not sure GME wants it's legacy to end that way

I don't think it's GME management's job to look after the little guy when it could take advantage of a market inefficiency to the tune of billions of dollars. Not even sure what GME's legacy has to do with stock market trades at all.

 

Btw, I have no clue what any of this has to do with the "little guy" of who he is here.

[Pelagic]

Wouldn't GME issuing shares to the shorts, or even to the open market, just fuel the narrative the deck is stacked against the little guy? It doesn't matter that the shorts have lost billions because the share offering would prevent them from losing more billions while tanking the share price for the retail traders who were long the stock.

 

Not sure GME wants it's legacy to end that way

I don't think it's GME management's job to look after the little guy when it could take advantage of a market inefficiency to the tune of billions of dollars. Not even sure what GME's legacy has to do with stock market trades at all.

 

Btw, I have no clue what any of this has to do with the "little guy" of who he is here.

 

Isn't there a case to be made that if GME's management doesn't issue shares here and 6 months to a year down the road it turns out they actually are a mediocre brick and mortar company that needs capital, they failed in their duty to shareholders?

 

Someone on WSB suggested GME should become a brokerage and take all of Robinhood's customers  ;D

[LC]

Exactly. I can understand management wanting to unload their shares. I can understand the SEC pretending to protect the little guy. But if you’re trying for GameStop to succeed as a company, you have to try and issue shares here.

[fareastwarriors]

AMC is rapidly try to issue more shares. GME should do that same to ensure their own long-term survival.

[StubbleJumper]

Wouldn't GME issuing shares to the shorts, or even to the open market, just fuel the narrative the deck is stacked against the little guy? It doesn't matter that the shorts have lost billions because the share offering would prevent them from losing more billions while tanking the share price for the retail traders who were long the stock.

 

Not sure GME wants it's legacy to end that way

I don't think it's GME management's job to look after the little guy when it could take advantage of a market inefficiency to the tune of billions of dollars. Not even sure what GME's legacy has to do with stock market trades at all.

 

Btw, I have no clue what any of this has to do with the "little guy" of who he is here.

 

 

IMO, the question will boil down to incentives.  In its annual report, GME shows 3 million options outstanding under its share-based compensation programme.  The strike prices for those options are trivial, implying that the aggregate intrinsic value of those options would be about $1 billion, and most of that will be attributable to the C-suite.  But, not all of those options are vested!  If I am the CEO or CFO, there's not a chance in hell that I issue new GME shares until MY options have vested and I've liquidated them.  I sure as hell wouldn't flush $100m of value from my own unvested options by issuing new shares unless I had no other choice.  And with a handful of activists already on the board of directors, you can be sure that the C-suite will have a certain degree of cover if they remain in a holding pattern until they themselves have become independently wealthy.

 

Once my own shares have been liquidated and the vast majority of my options are vested and out the door, then sure, I'd consider a share issuance.  Or maybe I would just take my $250m and ride off into the sunset and let the next guy worry about whether to issue shares.  At this point, if I were part of the C-suite, I'd be building a shrine to WSB in my living room and fapping every night to photos of DeepFuckingValue.

 

 

SJ

[KCLarkin]

The more I look at this situation, the more I am convinced this is just a brilliant trade a la The Big Short and less a WSB YOLO flash mob. These guys were in this trade for months before it finally worked.

 

[Jurgis]

One of the obvious observations I have from the GME saga is how hard it is to determine what the short interest actually is on a highly shorted stock. You have companies like S3 that build products and systems just to figure this out. It seems like the root cause of this is the T+2 settlement lag. This creates a huge hole for naked shorting and probably other nefarious activity. Even getting the settlement time down to EOD would be a big improvement. I don’t think real time settlement is possible any time soon given the volume (HFTs etc...). It appears options are settled same day, why is the DTCC still living in the Stone Age? Am I missing something? Or is it just sloth.

 

It is very possible to have instant (in human time scale, in computer time scale obviously it won't be 'instant' but would take a few microseconds) settlement even today, the reason it is not like that is netting, netting is the concept that you don't have to change the ledger every time a trade is done and if in the mean time offsetting transactions occur you don't need to register them at all, netting is done to lower the cost of trading since millions of transactions can be netted and there would be only one lump some of money transferred between the brokers instead of millions of cash payments for really small sums.

Thanks for the response.

From a computing/distributed systems perspective I agree near real time is possible. But still a very hard problem. We know how to build these systems in practice but in reality it’s hard to build them correctly. But not saying it can’t be done.

 

But I think daily or bi daily settlement gets us much better visibility. Less intrusive of a change. And firms can still net or batch, just more often. I am sure they can deal with that. I guessing that netting happens on a daily basis today but the lag to settle the netted transactions is T+2. Reducing the 2 to T+(EOD-T) would be a big step.

The problem isn't on the stock side, the problem is on the cash side. Cash has to move from one party to the other an the cash rec departments at most FIs are just crap.

 

IIRC isn't ACH or whatever the companies use for cash transfer still at T+2 or T+3?

Edit: IDK, maybe some Fincos have something faster to settle cash.

[rb]

One of the obvious observations I have from the GME saga is how hard it is to determine what the short interest actually is on a highly shorted stock. You have companies like S3 that build products and systems just to figure this out. It seems like the root cause of this is the T+2 settlement lag. This creates a huge hole for naked shorting and probably other nefarious activity. Even getting the settlement time down to EOD would be a big improvement. I don’t think real time settlement is possible any time soon given the volume (HFTs etc...). It appears options are settled same day, why is the DTCC still living in the Stone Age? Am I missing something? Or is it just sloth.

 

It is very possible to have instant (in human time scale, in computer time scale obviously it won't be 'instant' but would take a few microseconds) settlement even today, the reason it is not like that is netting, netting is the concept that you don't have to change the ledger every time a trade is done and if in the mean time offsetting transactions occur you don't need to register them at all, netting is done to lower the cost of trading since millions of transactions can be netted and there would be only one lump some of money transferred between the brokers instead of millions of cash payments for really small sums.

Thanks for the response.

From a computing/distributed systems perspective I agree near real time is possible. But still a very hard problem. We know how to build these systems in practice but in reality it’s hard to build them correctly. But not saying it can’t be done.

 

But I think daily or bi daily settlement gets us much better visibility. Less intrusive of a change. And firms can still net or batch, just more often. I am sure they can deal with that. I guessing that netting happens on a daily basis today but the lag to settle the netted transactions is T+2. Reducing the 2 to T+(EOD-T) would be a big step.

The problem isn't on the stock side, the problem is on the cash side. Cash has to move from one party to the other an the cash rec departments at most FIs are just crap.

 

IIRC isn't ACH or whatever the companies use for cash transfer still at T+2 or T+3?

Edit: IDK, maybe some Fincos have something faster to settle cash.

No it's not, it's quite close to instant. But there are problems. For example: Finco 1 actually has to send the funds to the CORRECT Finco 2 (you'll be surprised how often this doesn't happen). Then Finco 2 needs to figure out what the money's for and assign it to the correct account - again, tricky. Then you have the issue that the money from Finco 1 has to go trough Finco 3 to get to Finco 2 and then theres the opportunity of a bunch of screwups at Finco 3. All in all between 3-5% of stock trades fail to settle because of this. That's a huge number.

 

This is why IB is so anal about the deposits and withdrawals forms.

[compoundinglife]

Learned recently that Martin Shkreli was early member and moderator of Wallstreetbets subreddit. He has been commenting on the GME situation on reddit over the past few weeks:

https://www.reddit.com/user/MartinShkreli

 

 

[rb]

Learned recently that Martin Shkreli was early member and moderator of Wallstreetbets subreddit. He has been commenting on the GME situation on reddit over the past few weeks:

https://www.reddit.com/user/MartinShkreli

You can do that from prison these days??  :-\

[compoundinglife]

Learned recently that Martin Shkreli was early member and moderator of Wallstreetbets subreddit. He has been commenting on the GME situation on reddit over the past few weeks:

https://www.reddit.com/user/MartinShkreli

You can do that from prison these days??  :-\

Someone in the free world posts to his reddit account on his behalf.