GameStop Stocks

[The Flush]

Securities Law Expert Compares GameStop Stock Saga to Storming of the Bastille

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Legal observers wonder whether the SEC will employ rarely-used market manipulation laws to manage Redditors' efforts to skyrocket the price of GameStop stock.

 

[saevel25]

That article hits on the crux of the issue for me. ck. 

What is illegal here? How should it be judged with out saying, You don't get to share ideas on buying stocks? This is why I think this is new ground for the SEC. The existence of reddit has changed the game. When before it was nearly impossible to transmit interesting stock buying strategies or stock buying in general to so many people in a short amount of time, now that is totally possible, and the volume can overwhelm the market. 

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During the dot-com era, when stock-market fever was at its height and many people spent significant amounts of time on stock Internet message boards, a 15-year-old named Jonathan Lebed allegedly used the Internet to run a successful pump and dump. Lebed bought penny stocks and then promoted them on message boards, pointing at the price increase. Allegedly, when other investors bought the stock, Lebed sold his for a profit, leaving the other investors holding the bag. He came to the attention of the U.S. Securities and Exchange Commission (SEC), which filed a civil suit against him alleging security manipulation. Lebed settled the charges by paying a fraction of his total gains. He neither admitted nor denied wrongdoing, but promised not to manipulate securities in the future.[10]

The question here is, did any of the people who came up with this strategy own GME before hand? If so, then it fits more into the classic pump and dump strategy. If not, then I don't see how you differentiate them from people who just group up and say, Lets buy this stock because I think it will go up other than they were talking with a huge group of people. 

To me, the market needs to fundamentally change how stock trades happen since now millions of people can buy stock all at once if they want to. 

 

[The Flush]

[ncates00]

21 minutes ago, The Flush said:

Hardly an accurate representation of what appears to have happened, but is a very prevalent view amongst lay folk it appears.  The former is the nature of business and entrepreneurship.  The latter could be market manipulation, as opposed to "just" buying stock as some have claimed.  There's a difference.  You learn these things pretty early on in business or law school.

[ncates00]

17 hours ago, saevel25 said:

To me, the market needs to fundamentally change how stock trades happen since now millions of people can buy stock all at once if they want to. 

I'm certainly not opposed to this.  What are your thoughts on changes that could address the issue?  Do have a particular NYSE rule, SEC reg, or statutory law in mind?

[MiuraMan]

Well I have to admit I am on the side of the redditors as I am a "lurker" on the site. In their parlance I am a "normie"; one who buys and holds stocks, mutual funds for the long term. I bought $5,000 (from my slush fund) worth of shares last Tuesday (approx. $85). I have a sell order in for Monday when the markets open.

Almost all of the people on r/wallstreetbets are only buying small amounts of the stock, but multiplied by the thousands. They are planning on not selling their stocks to "stick it to the hedge funders"; right now it is a "mob mentality" over there. It will be interesting to see how this plays out. 

According to data from Nasdaq.com, the following expiring near-the-money yet still in-the-money call options look like they were still open at the market close:

7,835 contracts at $320 per share.
855 contracts at $310 per share.
1,170 contracts at $300 per share.

So Monday should be an interesting day.

[saevel25]

2 hours ago, ncates00 said:

I'm certainly not opposed to this.  What are your thoughts on changes that could address the issue?  Do have a particular NYSE rule, SEC reg, or statutory law in mind?

Nope. I am a novice when it comes to these things. 

If the SEC doesn't even 100% investigate naked short selling then they are a useless regulator body. To me, they only seem to go after things depending on the impact it has rather than it actually breaks regulatory statutes. 

38 minutes ago, MiuraMan said:

Almost all of the people on r/wallstreetbets are only buying small amounts of the stock, but multiplied by the thousands. They are planning on not selling their stocks to "stick it to the hedge funders"; right now it is a "mob mentality" over there. It will be interesting to see how this plays out. 

I don't see how you regulate this with out changing the mechanics of Wall Street. Reddit, Twitter, and other places were people can group up in mass make it very easy for them to all decide to go all in on a single stock in volume. It's super difficult when the market manipulation doesn't match up with previous rulings. This will be new ground for the SEC in their interpretation of this situation. 

I understand the market manipulation side of it, but I also see this as something that is different than what we have seen before. 

The closest example, I think it was a few college students who bought a stock, then made a website to promote the company to get people to buy the stock and push it higher before they sold their shares with out telling anyone. There is a correlation here, but it's not exactly the same. 

If you go after these people for this, then they better explain to us who might use Reddit or other similar avenues to get stock strategies or guidance, what are we suppose to do going forward? 

This is why I think they need to fix Wall Street and not just go after this WallStreetBets. 

[ncates00]

12 minutes ago, saevel25 said:

Nope. I am a novice when it comes to these things. 

If the SEC doesn't even 100% investigate naked short selling then they are a useless regulator body. To me, they only seem to go after things depending on the impact it has rather than it actually breaks regulatory statutes. 

I don't see how you regulate this with out changing the mechanics of Wall Street. Reddit, Twitter, and other places were people can group up in mass make it very easy for them to all decide to go all in on a single stock in volume. It's super difficult when the market manipulation doesn't match up with previous rulings. This will be new ground for the SEC in their interpretation of this situation. 

I understand the market manipulation side of it, but I also see this as something that is different than what we have seen before. 

The closest example, I think it was a few college students who bought a stock, then made a website to promote the company to get people to buy the stock and push it higher before they sold their shares with out telling anyone. There is a correlation here, but it's not exactly the same. 

If you go after these people for this, then they better explain to us who might use Reddit or other similar avenues to get stock strategies or guidance, what are we suppose to do going forward? 

This is why I think they need to fix Wall Street and not just go after this WallStreetBets. 

You’ve got a pretty reasonable response. Hard to argue with. 
 

I will pushback, however, and say that they will be/are investigating the brokerage firms/trading platforms with regards to the trading freeze, too. So, to your point, there could be new regulations coming to address both sides of it—the investor side and the broker side. I’m not sure whether it will come in the form of a statute, SEC rule, or a stock exchange rule. We’ll just buckle up and see. 

[MiuraMan]

15 hours ago, saevel25 said:

...

If you go after these people for this, then they better explain to us who might use Reddit or other similar avenues to get stock strategies or guidance, what are we suppose to do going forward? 

This is why I think they need to fix Wall Street and not just go after this WallStreetBets. 

Here is a perspective from a company that specializes in investment advice, they routinely sent out reports on short selling opportunities, Citron Research. 

Citron Research, which was forced to close out its short position in GameStop amid a frenzy in retail buying, said Friday it will no longer publish short reports and instead will focus on long positions.

“After 20 years of publishing Citron will no longer publish ‘short reports’,” the firm said in a tweet. “We will focus on giving long side multibagger opportunities for individual investors.”

Short seller and Citron Research founder Andrew Left said earlier this week that after speculative retail traders drove up GameStop’s stock, he covered the majority of his short position in the video game retailer at a loss. He previously said GameStop will fall back to $20 a share “fast” and called out attacks from the “angry mob” that owns the stock.

“20 years ago I started Citron with the intention of protecting the individual against Wall Street, against the frauds and the stock promotions were just all over,” Left said in a YouTube video on Friday. “Where we started Citron was supposed to be against the establishment, we’ve actually become the establishment.”

All of a sudden he is "woke".

[saevel25]

1 hour ago, MiuraMan said:

All of a sudden he is "woke".

Jesus, people can have changes of heart you know. 

[The Flush]

 

[ncates00]

1 hour ago, The Flush said:

 

How can an investor short more stock than is in existence? An issuer, by its own articles of incorporation and bylaws, only has X amount of shares to issue in an IPO, and then shares end up in the secondary markets. Where are these “ghost” shares coming from? Additionally, just imagine how these made up shares would impact a company’s capital structure and internal governance with respect to voting (if the stock is voting stock). 

[saevel25]

10 minutes ago, ncates00 said:

How can an investor short more stock than is in existence? An issuer, by its own articles of incorporation and bylaws, only has X amount of shares to issue in an IPO, and then shares end up in the secondary markets. Where are these “ghost” shares coming from? Additionally, just imagine how these made up shares would impact a company’s capital structure and internal governance with respect to voting (if the stock is voting stock). 

 

Naked Shorting Definition

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Naked shorting refers to the practice of selling shorts associated with shares that investors do not already possess.

 

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KEY TAKEAWAYS

• Naked shorting is the now-illegal practice of selling short shares that have not been affirmatively determined to exist. 
• Ordinarily, traders must first borrow a stock or determine that it can be borrowed before they sell it short.
• Due to various loopholes in the rules, and discrepancies between paper and electronic trading systems, naked shorting continues to happen.
• Although controversial, some believe naked shorting plays an important and positive market role in price discovery.

 

[ncates00]

16 minutes ago, saevel25 said:

 

Naked Shorting Definition

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Naked shorting refers to the practice of selling shorts associated with shares...

 

 

Thanks man. I’ll look into this a little more. 

[MiuraMan]

"Abusive shorting are not random acts of a renegade hedge funds, but rather a coordinated business plan that is carried out by a collusive consortium of hedge funds and prime brokers, with help from their friends at the DTC and major clearinghouses. Potential target companies are identified, analyzed and prioritized. The attack is planned to its most minute detail."

Anatomy Of A Short Attack

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Published courtesy of Citizens for Securities Reform, at http://counterfeitingstock.com/CS2.0/CounterfeitingStock.htmlAbusive shorting are not random acts of a

 

[DewSweeper09]

GME and AMC are meme stocks.. it won’t end well for retailers chasing. It makes me sad to see so many uninformed people losing their money on these...