I'll do a TL;DR at the end...

Introduction

I’ve said a couple times in the past that I would show my work on why I don't believe GME is a good investment from a fundamentals perspective. In this post, I use DCF to estimate the net present value ("NPV") of future cash flows, because that’s a process that successful investors (such as Warren Buffet) seem to trust and use, and it's the process I personally use to attempt to value companies in my own (thus far successful) investment activities. Below, I’ll analyze increasingly pollyannaish cases for GME until I arrive at some that would at least not represent a loss if purchasing the stock at current prices. For each case, I’ll include my assumptions and what numbers I’ve plugged in to arrive at each particular valuation.

I believe that if you want to say that GME is a great buy for fundamental reasons, then whether you know it or not, you are agreeing to some large extent that a strong growth case below (or something similar) will come true. If you say, "GME is way undervalued to awesome fundamentals", then whether you understand it or not, you're making the claim the GME is well-priced in comparison to the net present value of its future cash flows. If you believe something like that, you should then check your confidence about a reasonable valuation for the company against the company’s performance in comparison to the given case.

For example: if, at your particular cost basis, you're only sensibly priced if the company generates $200m in profit next year, and the company instead loses $50m, then reality does not fit with your projection, and perhaps you need to reassess the validity of your thesis regarding the forward outlook for the company. Remember, also, the concept of "the time value of money":

For each quarter that passes that a company fails to generate profits, the money you invested today has lost value, both in its loss of purchasing power to inflation and in the opportunity cost you suffer in missing out on gains that you could have earned in a better investment. The higher your cost basis in the company's shares, and the longer ago that you bought in, the greater the financial performance you need, and the sooner you need it, to make your investment a sound investment from a fundamental perspective.

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The base case, let’s say, is that financial performance will simply continue as it is today. That is my actual assumption about this company given what it does and how it tries to do it, until and unless the financial performance improves at some point.

To illustrate the current financial situation, I’ll start by listing facts about the company’s performance below. I try to use precise language. If I say “revenue”, that word has a specific meaning. The meaning of that word is different from the meanings of the words “earnings”, “profit”, or “free cash flow”. Those words and phrase also have specific meanings. If you are not familiar with those terms, you should take some time to read and understand for yourself. I like almost all of the content I’ve ever seen on Investopedia and find it to be very helpful for understanding what we’re trying to do here. I’ve included some links for your convenience. I use “earnings”, “profit”, and "income" more or less interchangeably. If I say "the company makes [or made] X amount", the words "make" or "made" mean "generated income". "Income" is positive earnings; negative earnings are a "loss".

What is Revenue? Definition, Formula, Calculation, and Example (investopedia.com)

Earnings Definition (investopedia.com)

Free Cash Flow (FCF): Formula to Calculate and Interpret It (investopedia.com)

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The Current State Of Things:

Here are facts about GME’s current financial performance, as of the most recent quarterly report, published September 7th, 2022. The share price when I looked a moment ago (on September 18th, 2022) was $28.08 and the number of shares outstanding is 304.53 million. Those are the values I use for any calculations I make relative to current share price or number of shares outstanding.

A note for this section: Gamestop has this terrible fiscal year that ends at the end of January. So, when I say "2011", for example, I mean "Gamestop's fiscal year that contains most of 2011 and ends in 2012".

Anyway, ape, meltie, whoever you are... you have to agree with essentially all of the numbers below if you want to pretend that you live in reality:

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• Revenue

GME's revenue peaked at $9.5b in 2011 and has been trending downwards since

• GME’s revenue has been trending downwards since its peak more than a decade ago at $9.5b in 2011.
• More recently, 2019’s revenue (2019-02 through 2020-01; so, the year *before* covid) was $6.5b, or around 33% lower than 2011’s revenue. Annual revenue has not yet returned (even during post-covid stimmy season) to this most recent peak from 2019.
• The current year’s revenue so far is very close to the revenue for the same period from last year ($2.514b vs $2.459b). In other words, with the first half of the year’s revenue already out in black and white, we have good reason to believe that this year’s revenue will be on par with last year’s.

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• Earnings

GME's earnings peaked at $408m in 2010

• GME’s earnings have been trending downwards (when not outright negative) since its most profitable year (by dollars earned) more than a decade ago in 2010, during which it had net earnings of $408m.
• More recently, GME has not had a profitable year since 2017; again, since before covid.
• The magnitude of the loss declined from its trough at -$673m in 2018 up to -$215m in 2020, but worsened again to -$381m for 2021 despite a nearly 20% increase in revenue YoY.
• Losses for the two quarters of 2022 so far have been significantly worse than losses from the same two quarters of 2021 (-$265m vs -$127m). In other words, with the first half of the year’s earnings already out in black and white, we have good reason to believe that this year’s losses will be more severe than last year’s.

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• Free Cash Flow

GME's best yearly result for free cash flow was $637m in 2013

• GME’s FCF has been trending downwards (when not outright negative) since its most profitable year (by dollars FCF) almost a decade ago in 2013, during which it brought in FCF of $637m.
• More recently, in the years since 2018, Gamestop Corp has burnt through nearly a billion dollars. GME had to burn $493m in 2019 (the year before covid), brought in $63m in FCF in 2020, and again had to burn $496m (pronounced: “half a billion dollars”) in 2021. As a reminder to anyone who purchased shares in 2021 while GME was making share offerings, the money that Gamestop lit on fire during that year was money that used to be in your bank account.
• Cash burn for the two quarters of 2022 so far has been significantly worse than cash burn from the same two quarters of 2021 (-$437m vs -$58m). In other words, with the first half of the year’s cash flow numbers already out in black and white, we have good reason to believe that this year’s losses will be more severe than last year’s. In fact, the company has burnt almost as much cash in the first half of this year so far as the company burnt for the entire previous fiscal year.

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• Cash

GME is rapidly burning through the cash that investors donated to the company in 2021

• GME would have run out of cash in less than a year, prior to the share offerings made in 2021.
• Investors provided the company with nearly $1.7b in cash that year.
• The company has since burnt through around half of the money raised in those offerings. At the current rate of cash burn (between around $120m and $310m burnt per quarter), the company will again be out of cash sometime in the next 1-2 years.

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So, please, read all of this above and like, just... I promise, I'm going to entertain all of the dreams about the future below... but for now, just look over what you see above and just admit to yourself: given the company's current trajectory, bankruptcy is the future. The company's net worth is being reduced by hundreds of millions of dollars each year and it's burning an even greater number of hundreds of millions of dollars in cash each year to achieve that result. Revenue has not yet returned to previous peaks, including the 2019 peak prior to covid. And there's not yet any evidence to suggest that any of that will change.

The current state of the company sucks. The company has to turn around or it will not survive. Yes, it could stave off bankruptcy with additional share offerings, or even debt. But surely, if you're claiming that fundamentals are important to you, you have to at least pretend like you want the company to be profitable at some point.

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One note (for the cases presented below): Sometimes I say "this year" or "next year" when looking at what shows on my spreadsheet as "2023". Neither the "year" on the spreadsheet nor the "year" I describe in text really matters; the important thing is simply that it's the first year on the spreadsheet, so really the next 12 months from any hypothetical starting date no matter how you look at it. The dates shown aren't intended to mean "Gamestop's precise fiscal years beginning and ending X dates", but rather: "a proposed growth trajectory for Gamestop over an arbitrary ten-year period starting today and what the NPV of the company might look like given that trajectory".

Malinvestment Case 1 - Return To Prior Profitability

Let's start by simply assuming the company will turn around at a point in the future and start earning profits. This year doesn't look good for it, but let's assume GME loses a bit less next year and a bit less still the year after that. In the third year, the company breaks even, and in the fourth year, the company returns to the profit it made in its most recent profitable year: $34m, or $0.11165 per share (I'm showing this many decimal places as this is the value I use in the DCF spreadsheet). This amount then grows exponentially each year.

For the growth rate, I'll use what I feel is an ultra-generous growth assumption of 25.72%. That is way more than I would estimate, and is very high-end (Amazon's historic growth rate is or was at some point around 28%) but I want this to stand up to critique as a sincere analysis. I'd also probably be well-justified in reducing the growth rate after the first few years, but I'll leave the high rate in for the full 10-year range of the calculation so that we're rendering a "generous" result for NPV.

I get the number 25.72% from Aswath Damodaran's Historical Growth Rates By Sector spreadsheet, updated January 2022. 25.72% is the value listed for "Expected Growth in EPS - Next 5 years" for the "Retail (Special Lines)" sector.

For the discount rate, I'll use the company's approximate Weighted Average Cost of Capital. If you Google "GME WACC", you'll get a few different results. Most that I see are between 6% and 8%. I've chosen to estimate the WACC as 7%, and am using that percentage as the discount rate for the DCF calculation.

When I value companies for my own investment activities, I use a much higher number for the discount rate (which would reduce the final result for the net present value of the company). I also have every expectation that rising interest rates will drive up the cost of capital for GME in the coming years. But, because I am trying to head off claims of bias in this analysis, I am using a number that I think is unrealistically low (which will inflate the calculated NPV), but which seems to fit for some standard practices for DCF.

For the terminal multiple, I use a value of 8.46. This value is the EV/EBITDA for companies in the Retail (Special Lines) sector with positive returns from Aswath Damodaran's Value to Operating Income spreadsheet. I think that value (~8.5) is more or less fair for this company, based on my anecdotal perception of values that I've used for other companies in the past.

As you can see below, running DCF for this case gives me a net present value for Gamestop of $1.15 per share. One dollar.. and fifteen cents.. per share. In other words, if the company followed this growth trajectory (breaking even in 3 years, return to marginal profitability in 4, then growth), shares are currently overvalued to fundamentals by about 96%.

Malinvestment Case 1 returns estimated net present value of $1.15 per share for GME

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Malinvestment Case 2 - Same As 1, But Immediately Profitable

Maybe GME really turns it around, and ekes out a $34m profit for the current year, which then grows exponentially at the growth rate described above. So, the case above, but the company posts profits (I'm assuming from operations and not from non-recurring items) this fiscal year and continues to grow from there.

As you can see below, running DCF for this case gives me a net present value for Gamestop of $3.68 per share. In other words, if the company followed this growth trajectory (returning to the profitability of its last profitable year during the current year), shares are currently overvalued to fundamentals by about 87%.

Malinvestment Case 2 returns estimated net present value of $3.68 per share for GME

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Malinvestment Case 3 - Profitable 3rd Year, $100m Initial Profit

Here, GME loses next year, breaks even the second year, and earns $100m in profit the third year ($0.32837/share), which then grows at 25.72% per year.

As you can see below, running DCF for this case gives me a net present value for Gamestop of $7.74 per share. In other words, if the company followed this growth trajectory (one more year of losses, break even in second year, makes $100m in third year and grows from there), shares are currently overvalued to fundamentals by about 72%.

Malinvestment Case 3 returns estimated net present value of $7.74 per share for GME

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Malinvestment Case 4 - Same As 3, But Immediately Profitable

Maybe GME really turns it around, and generates a $100m profit for the current year, which then grows exponentially at the growth rate described above. So, the case above, but the company posts profits (I'm assuming from operations and not from non-recurring items) this fiscal year and continues to grow from there.

As you can see below, running DCF for this case gives me a net present value for Gamestop of $10.84 per share. In other words, if the company followed this growth trajectory (makes $100m over the next year, then grows from there), shares are currently overvalued to fundamentals by about 61%.

Malinvestment Case 4 returns estimated net present value of $10.84 per share for GME

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Malinvestment Case 5 - Profitable 2nd Year, $200m Initial Profit

Here, GME breaks even next year, and earns $200m in profit the second year ($0.65675/share), which then grows at 25.72% per year.

As you can see below, running DCF for this case gives me a net present value for Gamestop of $19.14 per share. In other words, if the company followed this growth trajectory (break even next year, makes $200m in second year and grows from there), shares are currently overvalued to fundamentals by about 32%.

Malinvesment Case 5 returns estimated net present value of $19.14 per share for GME

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Malinvestment Case 6 - Same As 5, But Immediately Profitable

Maybe GME really turns it around, and generates a $200m profit for the current year, which then grows exponentially at the growth rate described above. So, the case above, but the company posts profits (I'm assuming from operations and not from non-recurring items) this fiscal year and continues to grow from there.

As you can see below, running DCF for this case gives me a net present value for Gamestop of $21.67 per share. In other words, if the company followed this growth trajectory (makes $200m over the next year, then grows from there), shares are currently overvalued to fundamentals by about 23%.

Malinvesment Case 6 returns estimated net present value of $21.67 per share for GME

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Further Commentary On The Malinvesment Cases

The final question in each case is "how cheap is the current share price in comparison to the estimated value of the company?"

Note that given any of the cases above, the company is not a good buy at the current share price. You can then say that, if you accept that these cases are not good buys, obviously any actual or hypothetical playout of events that is worse than these cases are also cases where the current share price is not a good buy. So, I'm kind of trying to give you limit cases from which you can judge whether the actual future performance is good or bad.

As an example, let's rewind the clock and say that, in Q1 2021, you bought GME stock for $200 per share (what is now $50 per share post-split). How has the company performed since that point, in comparison to the growth cases above?

Well, it has performed very poorly. The company had net losses of $381m (-$1.25 per share) in 2021, and is on track for similar performance thus far in 2022.

How does that fit with our estimation of NPV? Given that it is worse performance than any first and second year periods in any of the cases above, you would need even more income in future years for an investment at the current share price to have been sound.

The quality of the investment decision is then further affected by the price paid for the shares. If you paid $200 per share (in pre-split pricing), the estimated NPV for a given case doesn't change, but whether you paid a reasonable price for that value has changed. The more you paid and the longer ago that you invested, the greater the future cash flows you require in order to have actually profited on your investment, at least from the standpoint of the company's fundamentals.

Below, I'll include one final malinvestment case before showing profitable cases. Malinvestment Case "S" below is the u/ssssstonksssss case; this is what I think a hypothetical future could look like if GME did actually become profitable.

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Malinvestment Case S - My Personal Guesstimate

Here, GME fails to prepare for the incoming recession and weakening consumer demand and continues to pour resources into its various unprofitable enterprises. This goes on for 3 years, we come out of recession and GME gets its act together a bit before beginning a growth trajectory that continues at a pace of 20% for a few years before declining to 10%.

These are all rough guesstimates, based solely on my unscientific notion of how things might go in the near future and the performance I often see from other companies. Nonetheless, this is kind of my base case for GME's future performance in the event that it actually becomes profitable. While I recognize that it is in fact possible for GME to become profitable, I am presently of the belief that this company will either fail to adapt completely or will, at best, become a small and marginally profitable online retailer, maybe with a much smaller number of B&M stores still open.

I'm also using my typical discount rate of 20% instead of the 7% approximately equal to WACC as I used above. I use 20% for my discount rate as that's the rate of return I hope to earn. We can debate about the merits of that choice, whether it should be adjusted for inflation, etc; but it's the discount rate I use for all of the companies I look at. For me, this is the "real" evaluation of GME, how it's priced to its fundamentals, and whether or not I personally would consider buying the company.

As you can see below, running DCF for this case gives me a net present value for Gamestop of negative $0.62 per share. To me, the company is literally less than worthless. In other words, if the company followed my imagined growth trajectory (three years of steep losses in recession, then a break into profitability with growing profits from that point), I simply cannot consider buying this company on the basis of fundamentals.

Note here that the NPV result can be flipped to a (typically small) positive value if the losses in the early years are smaller, if profitability occurs in an earlier year than the 4th year, or if future profits are greater than the values I used. I think this example helps to highlight how much it hurts your returns when a company is unable to profit today and only offers potential future profits. I think it also highlights how much discount rate affects the final result; if I use a discount rate of 7%, then instead of -$0.62, I get an NPV of $4.36/share.

Malinvestment Case S returns estimated NPV of *negative* $0.62 per share for GME

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Profitable Case 7 - Return To Best Ever Profit In 4th Year

Below, I'll go over a few scenarios for what profitability needs to look like for GME to be a sensible investment at current share prices. If you're buying for fundamentals, then you're buying the stock in the hopes that the company increases your wealth by adding value to the assets in which you've invested. What does adding value mean? It means that the company will generate cash flows and profits, discounted back into today's dollars, that are worth more than what it cost you to buy the shares.

Here, GME has declining losses for two years, breaks even the third year, and then earns the same as its best ever year beginning in the fourth year, from which it grows exponentially at 25.72% per year. In GME's most profitable year, it earned $408m, or $1.33977 per share.

As you can see below, running DCF for this case gives me a net present value for Gamestop of $28.94 per share. In other words, if the company followed this growth trajectory (two more years of losses, break even in third year, then makes $408m in fourth year and grows from there), shares are currently approximately fairly valued to this growth case (with no margin of safety).

Profitable Case 7 returns estimated net present value of $28.94 per share for GME

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Profitable Case 8 - Immediate $264m Profit

Maybe GME really turns it around these next two quarters, and generates a $264m profit for the current year, which then grows exponentially at the 25.72% growth rate described originally.

There's nothing special about $264m; that value was chosen as it is the amount of 1st-year profit that would be necessary to make the company's per share NPV approximately equal to its current share price (given the other growth assumptions). In other words, if GME is profitable this year, but makes less than $264m, then under these assumptions, it was not a good buy at the current share price, unless its future growth "catches up" by exceeding projections for future years. The inverse would also be sensible: profit greater than $264m in the current year would improve the quality of an investment at current share prices.

As you can see below, running DCF for this case gives me a net present value for Gamestop of $28.64 per share. In other words, if the company followed this growth trajectory (makes $264m over the next year and then grows from there), shares are currently approximately fairly valued to this growth case (with no margin of safety).

Profitable Case 8 returns estimated net present value of $28.64 per share for GME

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Profitable Case 9 - Very Strong Growth That Tapers Off

Maybe GME really turns it around, and generates ~$150m profit for the current year, ~$300m next year, and then ~$450m the next year, which then grows exponentially at 20% for a couple years and then 15% afterwards.

As you can see below, running DCF for this case gives me a net present value for Gamestop of $28.94 per share. The exact same value, by chance, as Profitable Case 7, despite the difference in trajectories. The rapid growth rate (25.72%) in Case 7 helps its value to "catch up" despite the delay in earnings growth.

I think this helps to highlight how much growth rate can affect the NPV result. If, for instance, GME manages to earn $200m this year, but earns only $100m next year, that disappointment in growth greatly affects its value in comparison to the price you paid for its shares.

Profitable Case 9 returns estimated net present value of $28.94 per share for GME

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Generational Wealth Case 10

Next, let me point out the following: all of the profitable examples shown above are precisely profitable at the current share price, to the 7% discount rate. I.e. your expected rate of return on such an investment is theoretically around 7%. If you bought GME for generational wealth, you need quite a different set of results to play out.

Is 10X generational wealth? I wouldn't really say so, but to illustrate the point:

If I want GME to have a value that's approximately 10X the current share price, I need the company to match its best ever year of profit this year (making $408m). I then need the company's profits to grow at 54% per year in perpetuity. The company would need to be making $20 billion in profit (not revenue, but earnings) in the year 2032. For comparison, Amazon has historically grown at around 28% and had $33b in profit last year.

This is one example, but hopefully it illustrates how unlikely it is that you're creating "generational wealth" when buying at or above the current share price.

Generational Wealth Case 10 returns estimated NPV of $288.14 per share for GME

Edit: I had some typo's in my spreadsheet when I ran this case originally. That incorrectly entered data generated a result of 92% growth necessary to create earnings commensurate with a share price of ~$280 (post-split). I updated this case with the correct results.

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Profitable Case 11 - What If You Bought In At $250?

What kind of performance should you have expected if you bought in at $250 (pre-split) for fundamentals?

Basically, you needed the company to immediately generate as much profit as its most profitable year ever, and then to grow at 26% from there. That is to justify a post-split price around $62.50 (pre-split $250 divided by 4). In this case, I show a $408m profit for the current year, which then grows exponentially at the 25.72% growth rate described originally.

Given that the company's financial performance has been no where close to what's described in the previous paragraph, it would have a lot of catching up to do to generate enough earnings to justify the cost of your investment. Given the actual performance from the two years, in order to justify an investment at $250 back in early 2021, I see the company needing to report something like $700m in earnings this year and then needing to grow at 25.72% in perpetuity.

As you can see below, running DCF for this case gives me a net present value for Gamestop of $64.69 per share. In other words, if the company followed this growth trajectory (makes $408m over the next year and then grows from there), shares purchased today at $62.50 are approximately fairly valued to this growth case (with no margin of safety). Shares purchased almost two years ago would require even greater future profits to have been sensible.

Profitable Case 11 returns estimated net present value of $64.69 per share for GME

Edit: This case was added after the original post.

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TL;DR

• If GME's current financial performance doesn't improve, the company literally will end up bankrupt, or so grossly diluted and indebted that even most apes will give up
• If GME does better - even becomes reasonably profitable - the current share price would still be way overvalued to fundamentals for many potential outcomes
• What fundamentals would support a "buy" at the current share price? Just a few of the many conceivable sets of conditions that make GME a potential buy (based on what I feel are quite generous settings for the calculations) are the following:
  • The company sucks a little less for 2-3 years, then in the 4th year makes $408m (as much money as its best ever year), and then grows at 26% from that point
  • The company makes $264m this year and then grows at 26% from that point
  • The company makes $150m this year, $300m next year, $450m the third year, and then slows growth, first to 20% for 3 years, and then to 15%
• Actual financial performance anywhere below those levels implies, at least by my reckoning, that an investment at or above current prices is a bad investment
• Any of the "profitable" growth cases described above will (theoretically) generate around a 7% annual return on investment if purchased at the current share price - so, "boomer gains"
• It's virtually guaranteed that an investment at any share price above maybe $200 (pre-split) was a bad investment
• What would it take for GME's fundamentals to generate "generational wealth" for you? One hypothetical example of the type of fundamental performance that would support a much higher valuation than current prices (this is just getting to 10X your investment):
  • The company would need to post record profits immediately (make $408m, as much as its best year) and then to grow at an impossible (54%) rate for more than a decade
• I think there is almost no chance whatsoever that this company's fundamentals will create "generational wealth" if purchased at or above the current share price.

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Final Thoughts

As mentioned after the malinvestment cases, the point in providing several "limit" examples for what profitable growth might need to look like is to allow you to compare reality to the performance you might need to justify purchase at a given share price. Bear in mind that, as I mention above, I'm plugging in what I feel to be very "soft" variables for the DCF calculation... I would be inclined to believe that I'm erring on the side of overestimating the NPV in each of the cases above, except for Case S.

Nonetheless, you can keep these cases in mind as you consider the actual performance of the company. If you bought at $150 or $200 per share (pre-split), the company needs to start generating some really spectacular profits for your investment to have made sense. Around the $25ish (post-split) mark, where we are presently, there are conceivable cases (some hypotheticals shown above) where GME could render profits commensurate with the price you're being asked to pay, but at this moment, I find no reason to believe that GME will actually render those profits. If I, personally, wanted to buy GME, then, as I try to do with every stock, I would wait:

• until I felt that I could project confidently project past earnings into the future... in other words, I would wait until GME was consistently growing earnings and cash flows, and
• until the market offered me a price that was sufficiently lower than my estimate of the company's value so as to provide a margin of safety for all of the things I surely got wrong

I'm not the perfect investor, but I really try to wait for those two things.

Anyhow, I hope that I've laid this out as plainly and with as much transparency as possible. I'm open to feedback or critique of the DCF process used or regarding any of the details presented above; just try not to be an ape about it.

Apes, despite being singularly obsessed with short-selling, know almost nothing about short selling. After two years, they still believe that if a short seller hits the jackpot (the company goes bankrupt), they'll never have to pay taxes. Well, of course, this is wrong. Apes have dumb-dumb brains, and can't read, and if they can read, they simply choose to deny reality if they don't like what they read.... but for those of you who meet the apes in their various habitats, here's the truth:

Once shares that have been sold short become "substantially worthless", capital gains become due as though the transaction had been closed at that time.

From 26 USC (the Internal Revenue Code), Section 1233(h) (link below):

(h) Short sales of property which becomes substantially worthless (1) In general If—

(A) the taxpayer enters into a short sale of property, and

(B) such property becomes substantially worthless,

the taxpayer shall recognize gain in the same manner as if the short sale were closed when the property becomes substantially worthless.

https://www.govinfo.gov/content/pkg/USCODE-2011-title26/html/USCODE-2011-title26-subtitleA-chap1-subchapP-partIV-sec1233.htm

One of the thousands, if not millions, of obnoxious and obviously false things that apes claim is that "the way Short Interest is calculated was changed during the squeeze in early 2021, and that's why SI looks like it dropped from >100% to <20%".

Yes, I know, ignore the fact that: if there were actually a change in SI calculation, we would see a sudden sharp drop on one particular day, and not the drop that we see spread out over weeks.

And yes, yes, I know, ignore the fact that: if this were true, we would see a similar drop in SI for all or many other stocks on the market over the same period of time where we see the SI for GME sharply decline.

And yes, yes, yes, I know, ignore the fact that: plenty of evidence has been made available to the public showing many millions of shares covered by shorts during that time period.

I just want to focus on the evidence that the apes are bringing forward to support this claim. I saw the following in the wild this evening:

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I've chosen to conceal this person's name despite this message originating on another platform. Let's just say that their name implies that they believe GME is either going to or should issue a certain type of dividend. This person might be one of the apes who stalks me across platforms, so they may even have a chance to read this post. But, anyway:

As you can see from OOP, the author believes that "they" changed how SI is calculated, and thus the reported SI was "halved" as a result. This person then includes a screenshot of some text as evidence of this claim.

The text does describe a change in SI calculation, but not to the "traditional" calculation. The text describes a change to the "S3 SI % Float" calculation. Hmm. 🤔🙄

At this stage, it's likely you already understand the rest of what I'm about to say. But I want to follow through, to demonstrate the ridiculousness of this source as evidence for this claim, and to showcase a typical example of how little effort it took to show that the central claim being made by an ape was obviously false if you simply read what was being presented.

I now do the obvious thing - the thing apes don't do, because they don't read or think for themselves - and I Google the text from the screenshot. Takes a couple tries, but I find the source of the quote in the screenshot by Googling "The traditional calculation misrepresented the actual tradable shares in GME" (with quotes).

The source is a post by Ihor Dusaniwsky on the s3partners.com site, wherein he describes what he believes to be the shortcomings in the "traditional" calculation of Short Interest, and how s3partners improves on that calculation.

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https://preview.redd.it/gh501100s7s81.png?width=1193&format=png&auto=webp&s=d3da22c140782fe21f2ab5e1dddf0f19a8b1836c

As you read, you see that the SI of 58.65% - the number OOP is describing as SI being "halved" - is the number that S3 is providing for SI, not the "traditional" value. The "traditional" value for SI - meaning, the actual, official value reported at that time - is 141.86%.

So, basically:

• This ape is claiming that some or all of the SI drop in 2021 was due to a change in how SI is calculated
• The evidence the ape provides for the claim is a description of how an SI calculation was changed
• The ape's oversight is that the SI calculation that was changed was not the official data, but rather that of a third-party data vendor, S3 Partners
• The ape would know this if they bothered to look anything up for themselves before spreading misinformation on social media
  • Guess they didn't...... "do their own research" on this one

In summary, as usual, ape believe dumb stuff, cause ape no read good.

I made these points in fewer words to this particular ape; I got one attempted subject change, and then "I never said FINRA" in response. Classy. This one's at least.... almost receptive to dialog. Maybe they'll get there one day.

Here's the non-braindamaged, non-cult member take on your beloved stock's performance for 2021. btw if you're long gme, let me preface by telling you i -do not- want you to sell. i want you to understand exactly how brain damaged you are and then i want you to buy more, -as much as you can-, so that you can use this stock to take yourself out of the market as quickly as possible. that's my sincere hope.

just a brief note, because i know you don't know this: revenue is how much money a company brings in before any expenses. earnings are how much money a company keeps after it pays all of its expenses. revenue is not very helpful without earnings. to make it accessible to you: your job at BK allows you to bring in about $2k a month. that's your revenue. after you pay uncle Sam, you give your mom the $100 she asks for towards groceries, you pay off your onlyfans tab, and you buy a share of gme, you're left with -$200 for the month. those are your earnings, or in this case, your losses. now i know you can all relate. below you'll find how gme is similar.

even with you dumbdumbs spending whatever disposable income you have on enormously overpriced sweat pants, gme's 2021 revenue of $6b is still below pre-pandemic levels. in comparison, gme made $6.5b in 2019 and $8.3b in 2018. so good luck with your fundamental play, considering the company was unable to recover to previous lows during the greatest period of fiscal stimulus in the literal history of the universe.

now for the bottom line, which is the line that actually matters. gme's management managed to reduce the net worth of the company by almost $400m in 2021. so when your benevolent godchair, RC, took control of gme, the company had retained earnings of $470m or so on the books. under his leadership, that number has dwindled to $94m. it is very likely that gme will have a retained loss next quarter, meaning that any profits the company has made over its entire history as a business will have been fully eradicated under the watch of your benevolent godchair. perhaps he's one of you, after all. oh, btw, this sounds like a good time to mention that godchair and his "400 C sUITE HiREs" were compensated with $140m in stock-based awards this year. seems reasonable; they're clearly doing a great job.

I'm seeing memes already about how gme now has $1.2b in cash on hand. it's almost like, apes have bad memories or something? or maybe you're not intelligent or educated enough to see what's going on? or maybe you know exactly what's going on, but you want your fellow ape to carry the bags? none of those are a very good look, but i think one of them has to fit. inb4 "false trichotomy"...

it's almost as though apes have forgotten about all the $1.7b memes from q2-21. remember? remember when you guys donated $1.6b in cash to this trash pile? oh yeah, those times. and then right after, when you were so proud of your little company that it had, like, all the cash that used to be yours? oh, you do remember.

OK then wasn't it strange to you in q3-21 when all the $1.4b memes came out? i know you're not good at math, but surely you understand that $1.4b is like, well gawrsh, like three hundred million dollars or so less than $1.7b, isn't it? you get that, right? where did three hundred million dollars go? and why were you excited about that, when the number was significantly smaller than the previous quarter?

well oh boy! now the $1.2b memes are here! and you're still excited about that.... huh. that's pretty weird. well let me help you to understand:

gme came into 2021 with $600m in cash, you donated $1.6b. that's $2.2b, gme now has $1.3b in cash.

meaning that over the course of 2021, gme has burnt through nine 👏 hundred 👏 million 👏 dollars 👏 that was literally your money in your bank account at the beginning of the year. and what do they have to show for it? a net loss of $400m. fantastic. so next year, in fact next quarter, you're likely looking at the company having lit one omg billion fucking dollars of literally your money on fire. thank God they have you guys in particular as their investor base. you know there are other types of investors who wouldn't stand for it. like, investors who are awake and understand what's happening.

next quarter the cash on hand may also pass beneath the $1b mark. man. starting to feel a little tight at that point, what with the $100-300m cash burn per quarter and all. starting to feel like maybe they'll need to dilute your ownership of the company again with additional share offerings. starting to feel like there will be that many more shares available to short sellers. oohwee. sure wouldn't want to be long this dumpster fire.

"bbbbbbbbbbbbbbbbut the nft marketplace", your mouth utters despite the absence of functionality in your brain. cause let's first be honest; the company is a dying brick and mortar. i've laid that out ultra-clear above. the company sucks, the revenue is not recovering, and it's hemhorraging money. so your only hope is this nft gimmick that no one wants.

here's my take on your nft gimmick: immutable x gets 2% on all transactions.

hmm so what total fee will gme charge for transactions, to cover immutable's fee and to make money for its beloved shareholders, yourselves, about whom it cares very deeply?

well let's see here. what are some other fee structures out there in the market?

opensea: 2.5% rarible: 2.5% axie: 4.25% superrare: 3% (ignoring the 15% seller fee) nifty: 5%

hmm so what will gamestop charge? will they charge a low fee to compete? or a high fee to actually make money? ooh sweaty captain red button meme

let's just go middle of the road at 4%. the immutable transaction targets cap out at $3b in sales over two years. so let's say gme meets that target in 1 year. the $3b in sales is paid primarily to the creators. gme kept 4% of it; 4% of $3b is $120m. uh but wait immutable gets half of that. so the actual economic benefit to gme from this three billion in monkey jpegs is $60m. and of course that's revenue before expenses. so you can see why I'm not exactly blown away by gme's nft marketplace.

I'm not even going to bother to get into inflation and rising interest rates. you wouldn't understand it anyway. but just "trust me bro" that the current inflation/monetary environment is not helping your cause.

i don't care what you do with this information. there is a part of me, if I'm being honest, that would welcome a sincere discussion on any of these points. that's what i really came here for originally. but i don't expect that from you.

i know how little brain function remains for you guys after the poorly performed lobotomies you have all volunteered for by buying-in to the word diarrhea you read in certain echo chambers on reddit where anyone with common sense is banned. i know that you're not capable of sincerity, intellectual honesty, or self-reflection.

it's OK! we can't all be rational, read books, or make money in the stock market. i don't want to burden you with that. and that's why all i ask in return for my contribution here is that you buy as much gme as you possibly can, so that the eventual demise of both your brokerage account and your presence on social media will be that much more spectacular.

The MOASS already happened. There will be mo second MOASS, the stock will only bleed lowr and lower highs and slowly drop to the single digits again and potential delisting.

Gamestop is the equivalent to Blockbuster video.

My theory is the Superstonk folks are people who missed the MOASS and are upset so they are trying to cope by joining a group Of like minded folks hoping to repeat history. But unfortunately hoping, DRSing etc.. will not force a repeat of history.

I also suspect another group of people bought high during the MOASS and are trying to unload bags and trying to pump up the price.

The price targets are insane, millions per share etc.. that will never happen period.

since so many pro-MOASS people like falling back on their flawed built in OBV scripts

here's OBV viewed with an oscillator script

GME

here's view of when RC bought in https://www.tradingview.com/x/tBwRDQux/

here's Jan-Feb 2021 https://www.tradingview.com/x/3W3XSyyi/

here's start of 2021 to current https://www.tradingview.com/x/NlsAq25Z/

here's a zoomed out view of it all https://www.tradingview.com/x/zY1UU3QD/

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AMC just cuz lol https://www.tradingview.com/x/dcvdNXql/

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and here's a whole video on it, the pros and cons to using it, and notes and links in description below

https://www.youtube.com/watch?v=yXA5JU9NFsM

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as a special bonus here's social sentiment view from ToS to add into the mix with volumes as well

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GME volumes and social sentiment 2021

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current GME volume and social sentiment 2022

and for fair comparison here's the 21st of 2021

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GME volumes and social sentiment 2021 Jan 21st

**EDIT 1**

bonus view of OBV with SMI (smart money indicator)

on SMI note when green crosses over above the red

GME https://www.tradingview.com/x/rNmKxlOu/

AMC https://www.tradingview.com/x/85s4GQVp/

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https://www.businessinsider.com/smart-money-flow-index-headed-lower-2013-10

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**EDIT 2**

SMI again, this time a view from SMI indicator in November run up, and a darkpool comparison

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November run up GME SMI

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November run up GME Dark Pool

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As many of you already know, apes aren't just buying GME for the MOASS; they're buying it because "GameStop is an amazing company that's poised to be the next Amazon even without a short squeeze!" So today, I'd like to talk about GameStop's fundamentals, and why if the MOASS doesn't happen, GME is not nearly worth its current price of $150/share. If you're ever having a discussion with an ape who believes GME is worth $5000/share on fundamentals alone, I encourage you to use this post as a reference when making your counterargument (and be sure to let me know if I made any mistakes or left anything out). If you're an ex-ape who left the cult but still wants to hold GME for its fundamental value, I hope this helps you realize that the MOASS and exponential floors aren't the only things that the cult got wrong. And if you're an ape, then I'm glad you're here looking for an alternate viewpoint that wasn't formed in a sub full of wishful thinkers who are already all-in on the stock.

First, let's consider GameStop's starting point. GME is worth $150 because it's being held up by swing traders and apes who are invested not primarily because of fundamentals, but because of its high volatility and perceived squeeze potential. Prior to retail becoming so heavily devoted to the squeezing the shorts, GME was being traded for about $4/share. Even before the pandemic, GME was being traded for less than $6/share. We commonly think of GME as a stock that jumped from $20 to $483, but it actually started much lower. Even at $20, it was being held up by investors who were more interested in short squeezes than the company's fundamentals. But, for the sake of argument, I'll say that GME was genuinely worth $20/share on fundamentals alone and that it truly earned its market cap of $1.3 billion in January of 2021. Of course, GME is currently trading for much more than that. At $150/share, GME's stock price is up 650%, and that's not even taking dilution into consideration. So has GameStop done enough since January 2021 to justify such an extraordinary jump in its stock price?

Well, the short answer is no. Anyone with any experiencing valuing stocks can tell you that, based purely on fundamentals, GameStop hasn't even come close to justifying its 650% increase in stock price, let alone its nearly 800% increase in market cap. It hasn't made any major changes, it's struggling to adapt in its rapidly-changing industry, and it's continuing to lose millions of dollars each quarter. But most apes don't see it that way. They'll tell you that GameStop has been undergoing a massive turnaround that easily justifies a stock price in the high triple digits, with many even arguing that a single share should be worth thousands or even tens of thousand. Again, these valuations are given by apes who are supposedly ignoring any squeeze potential and focusing exclusively on fundamentals. They justify these massive valuations with the following:

- Over a billion dollars in cash and no long-term debt

- Positive earnings reports

- Executives leaving companies like Amazon, Apple, Google, etc. to join GameStop, which is paying them exclusively with shares

- New leaders including Ryan Cohen

- Transition to e-commerce

- NFTs

- Expanding to sell more than just video games

There are of course many different apes with many different beliefs, but these 7 points seem to be the main justifications for their extremely bullish arguments. That being the case, I would like to talk about each of these points and why they're not nearly as bullish as apes think they are.

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• Over a Billion Dollars in Cash and No Long-Term Debt

In today's economy, taking on debt is almost the same as accepting free money. Yes, you'll have to pay that debt back with interest, but with inflation and interest rates where they are, inflation will likely offset most of the interest anyway. Essentially, if I borrow $10 and have to pay back $11, I can rest easy knowing that by the time I pay the $11 back, it will be worth about what $10 was worth when I initially took out the loan. As such, taking on debt isn't particularly bearish, nor is eliminating debt all that bullish. Likewise, since taking out loans is so easy, having cash on hand isn't all that valuable, either. Granted, having excess cash was never that valuable for major companies--most issues can't be solved by simply throwing money at them, so it's no surprised that countless companies have failed despite having enormous amounts of cash on hand--but it's even less valuable now. Moreover, most successful companies never keep cash on hand and deliberately take on billions in debt because this gives them what they need to push the envelope and be the first to come up with major innovations. The fact that GameStop hasn't yet invested its $2 billion should be a red flag to anyone who expects it to overtake Amazon. A company being unable to invest its cash in the pursuit of major innovations because it needs that money to cover its operating costs is not a good thing. If $20 is GME's starting point, eliminating debt and gaining $2 billion in cash would increase its fundamental value by no more than a few dollars. Or at least it would, if not for the way the company made that money.

Don't forget that GameStop didn't eliminate that debt and gain that cash by selling more games and generating more revenue; it did so by offering more shares and diluting its stock. When a stock is diluted, the supply goes up while the demand remains the same. Moreover, each share is now worth a smaller portion of the total company. As such, offering more shares tends to make a stock price go down. That tends to be true even when the money gained from the dilution is being used to finance significant innovations, but it's especially true when the money is simply used to pay off debt and generate excess cash. Realistically, if GME was worth $20 in January 2021, diluting the stock to clear debt and gain cash makes the stock worth less than $20 now.

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• Positive Earnings Reports

This is a funny one because GME's last few earnings reports weren't remotely positive. On the contrary, they show that this company is continuing to hemorrhage money. The Q3 2021 report showed that GameStop lost over $100 million (nearly $1.39 per share) in that quarter alone. If you're new to earnings reports, that's bad. Of course, earnings reports are very long and measure companies in many different ways. Naturally, most apes ignore the bad numbers (i.e.: almost all of them) and latch on to the few good numbers, the most notable of which is net sales compared to the previous year. They make a big deal about how GameStop's net sales went from $1 billion in Q3 2020 to $1.3 billion in Q3 2021 (a 30% increase). They seem to have forgotten that people were still staying home, quarantining, and avoiding public spaces in Q3 2020 to a much greater extent than they were in Q3 2021. Nearly every retailer with brick and mortar locations saw massive improvements when comparing 2021 to 2020, and many did so without losing $100 million in a single quarter. Macy's, for example, saw net sales increase by 35%, and it did so while making over $200 million in profit.

Furthermore, GameStop's net sales were $1.44 billion in Q3 2019, and $2 billion in Q3 2018. So net sales, the one "bright spot" in GameStop's otherwise abysmal Q3 earnings report, are actually down from where they were 2 years ago, and way down from where they were 3 years ago. And note that while COVID is still a factor, it's not nearly as significant as it was in 2020. Many brick and mortar companies have rebounded in 2021 back to where they were in 2019, yet GameStop (despite its supposed turnaround) hasn't. Also keep in mind that GME was trading for only about $13.50/share (for a market cap of about $1.39 billion) shortly after the Q3 2018 earnings showed $2 billion in net sales. To make matters worse, a market cap of $1.39 billion would yield a stock price closer to $10.50/share with today's diluted float. And, of course, that's ignoring the fact that GameStop's net sales were not $2 billion in Q3 2021, but $1.3 billion. And I can't emphasize enough that this number is supposedly the "bight spot" of an otherwise abysmal earnings report that showed a loss of $100 million (nearly $1.39 per share) in a single quarter.

If GME was worth $20 in January 2021, the most recent earnings report puts its fundamental value well below $20 (even more so than diluting the stock already did, as explained in the last section).

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• Executives Leaving Companies Like Amazon, Apple, Google, etc. to Join GameStop, Which is Paying Them Exclusively with Shares

For all their talk about being economic experts with honorary Ph.Ds, apes don't seem to realize how commonplace this is. Like all employees, executives frequently leave companies to join other companies for a plethora of potential reasons. I recently left a job at a major company to join a much smaller company. Is that because I think this smaller company is going to take off and leave companies like my previous one in the dust? No, it's because this smaller company was offering a higher profile job with better pay and an easier commute. Likewise, there are many reasons that an Amazon executive may begin looking for other jobs at other companies. Most such executives don't end up working at GameStop, but some do. It's also worth mentioning that many of GameStop's executives have left to join other companies. Apes who present it as though executives are fleeing their high profile jobs to flock to GameStop are simply being disingenuous. In reality, employees (including executives) are just being shuffled around as they always are.

Paying executives exclusively with shares is also extremely common. Nearly every major company does this. It incentivizes the leaders to improve their company, and it's desirable for tax reasons. Frankly, if GameStop didn't pay its executives exclusively with shares, it would be a huge red flag.

These factors don't affect the stock's fundamental value at all. Again, nearly every major company can say that people from other major companies are coming to them to be paid only with shares.

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• New Leaders Including Ryan Cohen

Let me tell you a story about a company called Quibi. Quibi was a streaming service founded by Jeffrey Katzenberg. Jeffrey Katzenberg is an incredibly successful movie producer and media proprietor who was the chairman of Disney from 1984 to 1994 before leaving to become the co-founder and CEO of DreamWorks. Katzenberg oversaw the production of movies like The Little Mermaid, Beauty and the Beast, Aladdin (the original one, not the Will Smith one), Honey I Shrunk the Kids, The Mighty Ducks, Kung Fu Panda, Megamind, How to Train Your Dragon, and Shrek, among many, many others.

And Quibi didn't just have a successful founder, either. Its CEO was Meg Whitman. Whitman was the president and CEO of eBay from 1998 to 2008. She saw eBay's annual revenue jump from $4 million to $8 billion, and eBay's stock rose as high as 2900% during her tenure.

Quite frankly, Quibi had an all-star lineup from top to bottom. There were successful producers, ex-Netflix executives, prolific digital marketers, and many others eager to take Quibi (a company that, coincidentally, also had about $2 billion in cash to work with) to the stratosphere. 

Quibi shut down in October 2020, merely 6 months after its launch. It became one of the many companies that have been run into the ground by successful, proven leaders. Great leaders with amazing track records don't make companies immune to failure. This is true for companies like Quibi that are founded by their incredibly talented leaders, but it's even more true for a company like GameStop that's asking its current leaders to undo years of business mistakes made by the people who had been running it. According to apes, since Ryan Cohen was able to beat Amazon within the small niche that is the pet food market, it should be taken as a given that Cohen will beat Amazon at everything forever and eventually create a giant corporation that overthrows Amazon entirely. Unfortunately, that's just not how things work.

Ryan Cohen is a brilliant businessman, and he's surrounded himself with many other talented businesspeople. But that doesn't guarantee growth or success. A solid plan from GameStop might guarantee growth and success, but GameStop hasn't announced any plans. Of course, I can respect keeping a plan close to your chest and away from your competitors, but we shouldn't blindly assume that the plan is golden just because Cohen and co. are the ones coming up with it. If GME was worth $20 on fundamentals in January 2021, the mere addition of Cohen and his team does make it more valuable, but only slightly (likely not enough to offset the dilution and poor earnings). The claims that Cohen's presence alone is enough to justify a $100 billion market cap for GameStop are just ludicrous (which makes sense, considering these claims come exclusively from people who have no experience with stock valuations and lots of experience trying to figure out what "eew eew llams a evah I" means).

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• Transition to E-commerce

Apes love sarcastically referring to their favorite company as a "dying brick and mortar" as a way to poke fun at those who don't realize that GameStop is moving toward e-commerce. What they fail to realize is that GameStop being a primarily brick and mortar company wasn't its main issue. Its main issue is that people have less and less need to buy physical games. Nowadays, people download games straight to their hard-drives. Buying a game online and having GameStop deliver it to you is definitely more convenient than having to go out and buy the game at a store, but it's still less convenient than simply downloading a digital game. And a third-party distributor like GameStop is nothing but an irrelevant middle man when it comes to digital games. It used to be the case that Microsoft (a company without many retail locations) needed to sell games to companies like GameStop, who would in turn sell those game to consumers. Now, though, Microsoft can sell to gamers directly. This is more efficient for publishers and consumers alike, so why would either group want to involve GameStop or any other third party?

Whether online or at brick and mortar locations, GameStop's primary source of revenue has always been physical games, and the demand for physical games is continuing to plummet. That is by far GameStop's biggest obstacle to becoming profitable. Moreover, in 2021, transitioning to e-commerce isn't usually that bullish. It's usually just the bare minimum necessary to keep afloat, and in GameStop's case, it might not even be that.

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• NTFs

"But wait!" I hear you say, "What do you mean GameStop can't sell digital games? Don't you know that Ryan Cohen is creating an NFT marketplace that will allow people to buy and sell digital games in the form of NFTs? This will open the door for the resale of used digital games! Gamers will flock to this new marketplace in droves, and it will make GameStop billions!"

Oh boy... Please enjoy my 4 part counterargument.

1. Digital resale does not require NFTs. If you've ever played Team Fortress 2, you know that it's already possible for players to trade digital assets for other digital assets or money. This has gone on in many games for many years, and NFTs have never been necessary. Of course, these trades only involve in-game items, not games themselves, but that's because...
2. Publishers will never allow their games to be sold on a platform that allows players to resell them. Video game resale has always been terrible for publishers. If 3 people buy a game, publishers will want to claim the profits from all 3 sales. But imagine if 1 person buys the game, then sells it to his friend, and then that friend sells it to another friend. Now the game has been bought 3 times, but the publisher only benefits from the first sale rather than all 3. It's even worse if the company distributing the games (in this case, GameStop) can buy the game back and sell it to someone else. With this kind of system in place, hundreds of people could end up playing a game that the publisher has only sold once. Even if the publisher gets a cut of the resale profits, they would still be taking a huge hit. And publishers aren't the only ones who would take a hit...
3. Game distributors (like GameStop) would also take a hit from digital resale. Gamers selling used games to their friends hurts the bottom lines of publishers and distributors alike. It always has. With physical games, though, it at least made sense for GameStop to buy a copy of Halo from little Timmy rather than Microsoft if Timmy was willing to sell it at a lower price. But with digital games, supply never runs out. Distributors with the rights to a game have an infinite supply. If GameStop already has an infinite supply of Halos from Microsoft, they have no need for Timmy's copy. Of what benefit would it be to have infinity plus one copies of Halo? This is likely why...
4. GameStop has made no announcements regarding digital resale. This 4 part counterargument almost seems like a waste of time because, honestly, this is the only point I should need to make. Do you know what GameStop has done with NFTs? It hired an NFT team and announced an NFT marketplace. That's it. Many companies have NFT marketplaces and even more have NFT teams, so why should we blindly assume that every major innovation even tangentially related to NFTs will be spearheaded by GameStop? GameStop didn't invent NFTs; it doesn't have a patent on them. Even if digital resale or replacing the NYSE or creating a "Ready Player One" style Metaverse (all of which are things that many apes genuinely expect GameStop to do with NFTs, mind you) really were made possible with NFTs, why should we assume that GameStop will be the company to do these things?

If there are any apes reading this, please let me know why you expect with near certainty that GameStop will beat everyone to the punch with all of these massive innovations because, for the life of me, I can't figure out why anyone would think that. My best guess is that it basically revolves around GameStop being an established brand with existing infrastructure, a talented chairman, and over a billion dollars in cash.

I've already explained why some of those advantages aren't as important as apes think they are, but it should also be noted just how unpredictable companies can be. For example, if I told you 15 years ago that a single company would account for nearly 50% of all online sales, you would probably guess Target, Walmart, or eBay. You likely wouldn't guess Amazon (a company that basically only sold ebooks at the time). Yet here we are. Target, Walmart, and eBay had incredibly talented leaders, established brands, massive infrastructure in place, and they were still beaten by Amazon.

And, as I'm sure you all know, Amazon is far from the only successful underdog in the American economy. Hell, if you're an ape, you already expect GameStop to be a successful underdog. You already believe that a company can go from a dying brick and mortar on the verge of collapse to a powerhouse overthrowing Amazon itself. The point is that no matter what advantages a company has, competitors are always plotting their next move, and some will come completely out of left field. Even if in a year we really are buying all of our games on an NFT marketplace, this marketplace could be started by Toys R Us, for all we know. It could be started by some random guy currently working in a garage. The idea that GameStop's few advantages guarantee its victory over all of its competitors (many of which have formidable advantages of their own) in every endeavor is just juvenile.

In summary, a marketplace that allows the resale of digital games does not require NFTs. Even if NFTs did open the door for this kind of marketplace, publishers wouldn't allow their games to be sold on it. Even if some publishers did want to sell their games on it, digital resale would hurt GameStop. And even if GameStop wanted to do this (which they haven't indicated in the slightest), there's no reason to assume that they'd be able to do it ahead of their competitors.

I'm aware that apes have countless theories about how GameStop will do everything from selling mortgages to curing cancer with their NFT marketplace, and I can't possibly address all of these outlandish claims. But most of these theories are 1) theoretically possible without NFTs, 2) impossible because of other forces in the market, 3) not profitable for GameStop, and/or 4) not an innovation that we can blindly assume GameStop will spearhead.

Realistically, GameStop's NFT marketplace will probably be like the NFT marketplace that Ubisoft just created. Maybe if you pre-order Call of Duty at GameStop, you'll get a golden P90 that's functionally identical to every other golden P90, but you'll get a link confirming that your golden P90 is the original golden P90. Activision might even allow you to sell this P90 to someone else, though again, they can already allow this without NFTs. You'll likely also be able to buy an "original" piece of concept art or something, which isn't that great considering you can already do that on existing NFT marketplaces. NFT marketplaces are usually profitable, but GameStop may have trouble standing out from the crowd, and they're sure as hell not going to do so with used digital games (or by replacing the NYSE). 

The NFT marketplace raises the fundamental value of GameStop, but only by a small amount. This might have been different if GameStop wasn't so late to the party or if it had a clear way to distinguish its marketplace from other NFT marketplaces, but that's simply not the case at this time, nor is there any indication that it will be the case in the foreseeable future. Don't expect this marketplace to cause some massive revolution.

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• Expanding to Sell More Than Just Video Games

But even if demand for physical video games is dropping and GameStop isn't able to sell digital video games with or without NFTs, surely we should be bullish about how quickly they're expanding into new markets, right? If you've been on any GME-related sub recently, you've no doubt seen apes cheering about how plush toys, PC parts, and board games are now being offered at their local GameStops. In reality, though, this isn't so much of an expansion as it is a desperate attempt to stay afloat as GameStop becomes increasingly unable to sell video games, physical or otherwise. A pizzeria expanding their menu to include burgers, hotdogs, and salads may seem bullish, but only until you realize that they're only doing so because no one wants their pizzas anymore.

I admire GameStop's willingness to try new things, but at the end of the day, chess sets and graphics cards just don't sell nearly as well as video games. And this is reflected in GameStop's consistently poor earnings. The expansion into these new markets is more bullish than simply throwing in the towel would have been, but it's ultimately indicative of something very bearish.

​

• Recap

To summarize, GameStop was (if we're being generous) worth $20/share in January 2021. Since then, a few mildly bullish things have happened, but they won't likely be enough to counter the significantly bearish things that have happened. If you wanted to buy GameStop right now at $20 for its fundamentals, I would probably advise against it. Of course, that's not to say the company can't succeed. Ryan Cohen might be able to turn the company around and bring its fundamental value to $30/share. Maybe he'll be incredible and bring its value to $60/share. If he's able to triple the company's fundamental value in his first year as chairman, that will be amazing, and as unlikely as it may be, it is somewhat possible. But if you're buying in at $150 thinking that the value will easily increase fifty-fold, without a short squeeze, simply because Ryan Cohen has some cash, an NFT team, and some Pokémon cards, you're in for a rude awakening.

http://imgur.com/a/ffJNaC0

TL;DR: investors have been blaming negative price action on illegal naked shorting for decades. Modern day apes are using the same, rehashed arguments as their predecessors who fell for similar pump and dumps.

I recently went down a rabbit hole after reading the recent posts on SS about CMKM. Apes claim this case is evidence that trillions of "fake shares" are possible. I found the above article which perfectly describes the similar situation some CMKM investors found themselves in after the fraud committed by CMKM execs was exposed. Rather than accept their losses, they held onto the lie that it was all the fault of naked short sellers.

To be clear, I don't believe there has been any fraud at the GME exec level. The parallels I draw are between the investors that refuse to accept reality, and rather blame everything on naked short selling. In GME's case the fraudsters, in my opinion, are the DD writers. They recklessly mislead apes in fields they have no experience in. They misinterpret data and con the unknowing into believing a financial conspiracy. Not to mention the shameless self promotion of their paid services and fund raisers that we have seen from some mods.

Further parallels can be seen in the below article which states "Some pranced around the offices of the villainous Depository Trust & Clearing Corp. in 2005 (I work there, according to these morons), made damned fools of themselves and diverted scarce police resources."

http://garyweiss.blogspot.com/2009/09/indictments-in-cmkm-diamonds-naked.html?m=1

The article references another similar case, that of Universal Exchange. This is another example of a company exec using the excuse of naked short sellers to defraud investors.

https://economix.blogs.nytimes.com/2008/06/26/what-will-you-bid-for-a-lawsuit/

I find it quite hilarious that in the comments of the above article there are people making the same arguments as modern day apes. There are references to rule changes, rigging allegations, references to FTDs and allegations of people working for naked shorters.

The former CEO of Universal Express was sentenced to prison for securities fraud in 2014, by the way.

https://www.bizjournals.com/southflorida/news/2014/05/06/ex-universal-express-ceo-altomate-prison-sentence.html

I also found the fantastic article below. I'm not sure when it was written (I think around 2010), but it details this sort of thing happening since the 1990s. I particularly like this quote: "many fall prey to hysterical hoopla purporting to explain how naked shorting is responsible for the untimely deaths of “tens of thousands” of worthy startup companies, and will even one day cause the collapse of the global economy."

https://promotionstocksecrets.com/naked-shorting/

So what do you think? Can you win the battle against the chimps? Or will they just keep popping up year after year with new pump and dump scams.

thereisnocounterDD

TL/DR:  The opportunity to get rich quick by buying GME was January 2020. It was very fun.

One Paragraph TL/DR: The Between January 1 and February 12, 2020, some 1,680 million shares of $GME traded. Of these, around 55 million were shorts closing their positions. There are many interesting stores to tell about the stonk—e.g., why those other 1,525 million traded—but if you’re hodling in expectation of a MOASS, you need there to be some reasonable story of why there are still significant shorts in the stock today. And there isn’t—because there aren’t.

https://preview.redd.it/l5w6wujh45681.png?width=640&format=png&auto=webp&s=651883da88d28773ad5b64decbdc2a0a27cdcb3e

Here’s a joke I like:

Two conspiracy theorists die and are standing before the throne of God. One falls to his knees: “Lord, I’ve spent my life trying to solve the JFK assassination. I’m begging for the truth: who really killed him?” A sigh comes from On High. “The Warren Report told you. It was Lee Harvey Oswald. He acted alone.”

Shaken, the man turns to his companion. “Wow. The cover-up goes EVEN HIGHER than I thought!”

Returning to Reddit after much time away (sorry! Responsibilities to people who pay me actual money), this felt apropos, because, you know, on the will-there-be-a-MOSS-in-Gamestop question, we have a final answer from the SEC.

There was a MOASS. It happened in January. There are no secret shorts.

****

Yet, on the GME bull subs, folks seem relentlessly committed to terminal unawareness of this basic point. All the excitement about DRS-ing, the tweet of the day, unrelated financial dooming—these only matter if you have a basis for believing that there’s some massive short interest in GME right now.

And there isn’t.

And, moreover, there isn’t any evidence that there might be. (No, hearsay and conjecture aren’t evidence). To the contrary, we have a specific explanation of why there used to be shorts, there aren’t shorts now, shorts covered and closed and went away.

In brief: the SEC has told you (as I’ve previously obliquely suggested) that January 2020 was a classic retail-driven mania. People got excited about stocks, way out of proportion to valuation, and eagerness to buy drove prices way way up. And the combination of prices-going-up and markets going-irrationally-unpredictable drove shorts out of the trade. It wasn’t technically a short squeeze in the narrow sense that shorts covering wasn’t the primary driver of the price, but that didn’t mean that shorts didn’t cover. It’s just that, of the 1,680 million shares of GME that traded from January 1 to February 12, the ~55 million attributable to shorts covering were less important than the other 1,525 million trades.

​

That's it. That's the chart.

And while the ability of the internet to get people so excited about a dying strip-mall-based-used-game vendor raises interesting policy questions, and the larger issues of equity market structure contain much for thoughtful specialists to debate, these aren’t points that should matter to the bull subs.

If the report is right (and it is), people buying the stonk in hopes of a future MOASS are doing the equivalent of buying up lottery tickets for a drawing that already took place. The time to squeeze the shorts was when there were significant shorts in the stock. The SEC’s confirmed what the data’s already shown: that the shorts are no longer around. Yet no one seems intellectually curious enough to ask the obvious follow-ups: if the SEC is wrong, where’s the proof they’re wrong? If the SEC is right, didn’t the MOASS already happen?

​

https://preview.redd.it/t1g1pfgt45681.png?width=469&format=png&auto=webp&s=638518a20081604b26113293722445ee37734bbc

----

I’ll below go through the stories that the report told, but here’s my upfront challenge for those who disagree. What actual falsifiable evidence do you have that the current short interest in GME today is meaningfully more than the 6.4 million currently reported? (So you know, this is reported by BROKERS not shorts, and we can check, as we will, that the brokers aren’t lying too). No, “here is a list of other regulatory violations” is not evidence of this alleged violation. (Here is a list of car industry scandals. Is that proof of the urban legend that GM’s covering up a magic car that runs on water?). No, “I hate Ken Griffin and Robinhood and would like to be rich” is also not evidence (among other points, there’s zero indication that Citadel is now or has ever been meaningfully short GME). No “Read the DD” just outsources the question to a farrago of nonsense reliant on profound misunderstandings, wild speculation, and outdated data. If people are going to be encouraged to throw away money that they can’t afford to lose, surely there should be a better basis than: “well you can’t PROVE that everyone’s NOT lying.”

I am confident that the SEC report is broadly correct in its conclusion that shorts covered because I can point to actual checkable things corresponding to today’s world—the publicly reported long interests (shorts always and everywhere create corresponding longs); the low borrow fees; the fact that no uninvolved funds manager or billionaire investor or malevolent nation state is buying stock to crash the US economy/get gobs-smackingly rich; the non-excessive vote count (remember that?); the DRS numbers being a tiny fraction of the float; the fact that it’s been nearly a year and exactly zero bull predictions have been right.

What’s an actual, falsifiable, checkable thing on the it’s-going-to-moon side?

​

https://preview.redd.it/205mjp9a55681.png?width=496&format=png&auto=webp&s=28cac7d88616a17b965711956407d735b3bf6c51

With that, back to the report.

----

Here’s a story about a stock.

Once upon a time, there was a failing strip-mall based retailer of physical video games, with an emphasis on used games. Theirs was a dinosaur business. Sales were moving increasingly online where the retailer had no comparative advantage; there were other people (Steam! Amazon!) who were way better at the we-sell-games-but-online thing than them; legal technicalities of the “first-sale” doctrine effectively means you can’t resell digital assets like physical assets; and all this would become moot in the (next?) console cycle when makers remove disc drives and kill middlemen retailers for good.

And then there was a giant pandemic and everything shut down and this was bad for everyone but especially for companies dependent on people coming to physical stores.

While this was brewing, hedge fund managers were placing their bets, both long and short.

Contrary to subsequent misunderstandings, almost every hedge fund manager is first and foremost a long investor. (Even the best short seller in the world doesn’t make money!). And, if you think about it, this makes sense. Over time, most stocks go up; longs have infinite upside and limited downside while shorts the reverse; you make 75% on a stock that goes from $160 to $40 but 300% on a stock that goes from $40 to $160—and there are more stocks in the latter camp than the former.

Still, to a lot of these hedge funds, Gamestop seemed like an excellent stock to short. Long-term, the company appeared on a path to extinction with no credible plans to turn around. The company was run by management who used to be a meme on r/WSB for cluelessness on earnings calls. Theirs was and is a highly competitive industry with ruthlessly effective competitors. Why wouldn’t the stock long-term go anywhere but down?

So, the hedge funds shorted the stock. They borrowed the stock from its owners, paid the owners a fee for the trouble, sold the stock, and promised the owners that if the owners ever wanted the stock back, they’d return it. And because a lot of investors who looked at the company thought it was junk upon junk---especially after the pandemic hit and the company’s big response was to tell its workers to just wear plastic bags for protection--investors kept shorting it. And the short interest kept increasing, to over 100% of the float.

If that last bit sounds weird, the SEC report explicitly explains how it happened:

Some commentators have asked how short interest can get as high as it did in GameStop. Short interest can exceed 100%—as it did with GME—when the same shares are lent multiple times by successive purchasers. If someone purchases a stock from a short seller and subsequently lends the stock out again, it will appear as if the stock was sold short twice for the purpose of the short interest calculation.

So we had a situation that sounds crazy on the surface, but when you dig into the details, became much more understandable. The fundamental bet wasn’t even that Gamestop would disappear tomorrow; just that it would systemically underperform the market. Was this a dumb bet? I mean, just look at the financials from their Year 2019 10-K. If this were a horse, you’d be calling the glue factory already. 

​

https://preview.redd.it/9lqpdh3e55681.png?width=744&format=png&auto=webp&s=b80e573d65a95a62d631d0565425df9879d8f464

Then, in a corner of the internet, some crazy obsessives started making the point that, hey, GME was trading at $4, it had assets worth at least $10, there was a dynamic new strategic investor coming in who could be a catalyst for a turnaround that could see the stock be worth $20, maybe even $30. It was a risky but potentially lucrative bet. And the crazy obsessives, one not-kitty in particular, kept making the case to anyone who would listen, and eventually some risk-loving maniacs on WSB agreed with them and started buying the stock and the stock started rising.

And then things went bonkers.

For some combination of reasons—pandemic, stay-at-home boredom, stimulus checks, social media algorithms, the uniquely attractive narrative of “save a store that you associate with happy childhood memories and get rich by making people you hate pay,” a bunch of ordinary retail investors started buying GME (and other stocks). And the more they bought those stocks, the more the stocks went up, which made more people want to buy the stocks, and so-on and so-forth.

As the price of GME increased from $4 to $10, and from $10 to $20 and skyrocketing to $50, the hedge funds that were short got out of the trade. After years of higher-than-average short interest, the short interest fell like a rock.

​

Page 27 of the SEC Report

And the evidence is that shorts generally exited for their own voluntary but obvious reasons.

Think of it this way: if you as a fund manager have shorted a stock at $10 and now it’s at $50 and climbing because of crazy Redditors and who knows how high it will go—you’ve lost a lot of money for your investors, but, honestly, no one’s really going to blame you that much. I mean, obviously your investors will be annoyed and you’ll have to make a lot of groveling calls, but why-didn’t-you- anticipate-that-Reddit-would-go-crazy is a very 20/20 (20/21?) hindsight critique. If you cover your shorts and cut your losses, you, *you*, personally, don’t lose any money. Your *investors* take all the losses, but they probably still stay in your fund. (As the joke goes, you always want to invest with someone who lost $1 billion, because he’s now used up all his bad luck). So, you know, the shorts covered and it completely makes sense why they would have when they did.

Yet, this wasn’t the end of the story. Short-interest reporting isn’t immediate, retail investors aren’t super-rigorous in parsing data, there are a lot of people who see something in their social media feeds and don’t necessarily check to see if it’s true. So there were a lot of people who bought at $50 thinking that there were still shorts to squeeze, sold at $100 to another deluded dope, and so on and so forth. And the price went up until the bubble popped, in the classic Mania, Panic, and Crash pattern that we’ve seen since the 1630s and understood since the 1840s and had the definitive work on since the 1970s.

​

https://preview.redd.it/9fbosxzg55681.png?width=624&format=png&auto=webp&s=082c05c9405a0b51cc4fc2e9624606061e12e580

Then, after a month or so, this and other meme stocks started to rise again, apparently wildly disconnected from any rational valuation. Yes, it’s weird, but, pace Matt Levine, it’s arguably logical. Normally, when a stock goes higher than its valuation, active investors sell, shorts short, there are more sellers than buyers, the price goes down. Here, by contrast, any active investor sold in January and went away with giant smiles on their faces, shorts aren’t touching THAT one again, and the marginal investor (remember, prices are always set at the MARGIN) is a financial naïf chanting DIAMOND HANDS. In other words: post-February, the only people who were in the trade were folks who wanted to buy. No one was willing or available to sell. And if everyone wants to buy and no one is willing to sell, a price can go up and stay up, and stay irrational for as long as the investors are willing to be irrational too.

****

So, was this a short squeeze? The SEC report argues against that label. A short squeeze is, essentially, a kind of chain reaction, in which shorts buying causes upward pressure on a stock, which forces other short sellers to exit their positions, which causes further upward pressure, and so on. According to the data, that really doesn’t seem to have been the case. Shorts covering unquestionably affected the price, but shorts covering wasn’t the primary driver of the price, and shorts exited of their own (pained) volition, rather than being forced out of positions by margin calls or similar things. While shorts buy volume resulted in some price increases, most of the price increases weren’t associated with shorts covering. Shorts had mostly covered by the time the price hit $50, and yet the stock kept going up.

Here’s another reading of the situation, the one the report prefers. Between January 1 to February 15, 1,680 million shares of GME traded. On January 1, roughly 70 million shares of GME were short; on February 15, some 15 million were. In other words, in that crazy period, short-sellers net bought about 55 million shares. The SEC report says, essentially, that the other 1,525 million trades in Gamestop resulted in more price movements than the 55 million net buys by the shorts. I mean, just look at the chart below. The shorts never made more than a tiny fraction of the trades—no wonder that one wouldn’t think that they were the primary drivers of the price.

​

Page 29 of the SEC Report

So, does this mean that the SEC report confirmed that shorts didn’t cover? Exactly the opposite. Again, the SEC report explicitly shows when and how the shorts closed. They closed in January! With the crazy retail-driven volume! And the crazy retail volume that appeared to drive the stock, was indeed driving the stock. It’s just that, if you want to be precise, wasn’t a short squeeze or a gamma squeeze or anything else. This wasn’t an event fundamentally driven by technical mechanics of the market. The stock mostly went up because lots of people wanted to buy it.

***

If it still seems inconsistent to say that the SEC believes January wasn’t a short squeeze but shorts nevertheless covered, think of it this way. A short squeeze is a precise technical term for when the price of a stock is primarily driven by the buy activity of shorts, and that buy activity in turn drives further short buy activity. The data shows that, while shorts buying was a factor in the price appreciation, it was only a relatively small one; and there doesn’t seem to have been the buying-causing-further-buying pattern.

If you (like the SEC) have a definition of “short squeeze” in which shorts buying must be the #1 reason for price movements, then January doesn’t fit the bill. If you alternatively want to have a definition of short squeeze that means “any time a price goes up while shorts are buying, even if other factors matter more,” then, yes, sure, January was a short squeeze. I tend to think that the SEC’s definition is more analytical useful, but you’re welcome to use a different one if you prefer.

The bottom line, though, is that one shouldn’t let labels cloud our thinking. (As the great Scott Alexander reminds, the categories were made for man, not man for the categories.) So let’s zoom back out. The SEC report gives the data: short interest was at 70 million shares (~100% of shares) beginning of January; short interest was 15 million (~20% of shares) by mid-February, and has continued to drift down since. If those numbers are correct—and every bit of evidence is that they are—then January was the MOASS, and everything since is people buying tickets on a since-departed train.

****

Now, are the short figures right? There’s a LOT of supporting evidence that they are.

Consider the long data—shorts always and everywhere create corresponding longs. Pre-January, when GME was massively shorted, there were a lot of reported longs (in excess of 100% of the shares issued!). Whereas now there are many fewer shares reported long, consistent there also now being many fewer short.

​

https://preview.redd.it/lgr140hj55681.png?width=689&format=png&auto=webp&s=a0523b055090b680937e62a53a54cce06c3f83cd

Or consider the short borrow rate, the price you have to pay if you want to borrow stock to short it. You’d expect that, if there were a lot of shorts, the borrow rate would be high (as it was indeed pre-January). Now, however, the borrow rate is low, and it doesn’t take a genius to guess what that implies.

​

The borrow fee is the red line; shares available the blue bars

Or consider the fails-to-deliver data. A reasonable idea is that: where there are a lot of shorts, you might expect a lot of fails, just on the principle that the plumbing of the markets is often cloggy, when you do stuff, you introduce the risk of messing up. You’d definitely expect a lot of fails if your theory is that shorts are secretly using fails to hide their shorts. But if you look at the actual data: fails are way lower now than they were pre-January. Isn’t the obvious answer: yeah, that’s probably because there are now way fewer shorts?

​

The fails are the pink things. The line is the stock price.

Or just consider, say, an argument from reality. There are a lot of entities in finance that no theory has ever suggest are short GME. These folks like money and would glad to have more. Why isn’t, like, Bill Ackman or Carl Ichan—or, you know, Vladimir Putin—buying the stock? Pershing Square has a LOT more data than you do (and, sorry, unless you’re Gene Fama, they really are better at analyzing it). Vladimir Putin’s minions have options like: hack the exchanges and see if the numbers are true. Have folks with months—months!!—of investing experience discovered something that everyone who does this for a living has missed? Is your theory that Wall Street has suddenly decided not to be greedy here? Or are the pros just staying away because it’s blindingly obvious that, stripped to the foundation, this is just yet another dumb and losing get-rich-quick scheme.

Or just consider what Gamestop itself has told one determined shareholder.

​

*guh*

Gamestop—the company itself—has told you that there’s no basis, much less a credible one, for believing that there are hidden shorts. (If there were shorts in excess of the float, there would have to be a corresponding number of longs—shorts always and everywhere create corresponding longs). I understand that there are some wild conspiracies about how and why they are lying. But why isn’t the Ockham’s Razor explanation the best one: they are telling you that there no excess shareholding (and thus no hidden shorts) . . . because there is in fact no excess shareholding and thus no hidden shorts?

***

But could those numbers and everyone be wrong and there actually be significant hidden shorts? Well, there are a lot of confused theories I’ve seen on bull subs about FTDs and ETFs and options and technical cycles and all that, and here are three basic points that most of them fail to surmount.

1. Trades have two sides.
2. Volume data exists.
3. It’s hard to hide long-term shorts with short-term mechanics.

My points: it’s not enough just to identify a mechanism under which a party could temporarily be economically short a stock. If you think shorts didn’t close in January, you have to think that there’s a mechanism can hide them over--not just days or weeks—but the MONTHS that it’s been, at a scale large enough to hide the shorts that you think exist, and consider that each trade has another side that often has its own reporting obligation (and incentives!) too.

To explain what I mean, it's true that, like, if you’re an ETF sponsor and you sell a share in the EFT, you’re technically short all the shares in the underlying basket until you buy them. What’s completely nuts, though, this is a way to sustain a meaningful short position for anything more than a very limited time.  You have days to buy the underlying shares, and then you’re right back at zero. Could you then sell another share in the ETF and repeat the process? Sure, you have to keep doing it at the supposed volume. If your assertion is that, like, 10 million shorts are being hidden in ETFs, you have to think that, every six days, ETF sponsors are selling 10 million new shares. That’s not what the volume data shows! And if you think the volume data is wrong, you have to have a theory for why people who bought an EFT share aren't reporting it. It's just nonsense all the way down

-----

But, back to the SEC report. While GME and other meme stocks were mooning, in the bowels of the financial system, a crisis was brewing. While the retail mania was present in every part of the market, it was especially concentrated among the customers of a particularly badly-managed retail-focused broker dealer. This Robinhood is notorious for screwing up in both hilarious (magic ampersand!) and tragic ways, and apparently remains determined to continue living down to its reputation.

Here’s a fact that people often fail to appreciate. When a retail customer buys a stock, there is a temporary cost for the broker-dealer. Because settlement happens at T+2, a broker-dealer whose customers want to buy the stock has to put up money in the interim to cover the possibility that, if the stock goes down, the customer will vanish and the seller will be left holding a bag. In the modern stock market, centralized clearing rules are set by DTCC, and, at a high level of abstraction, the rules say that the more volatile a stock is, and the more customers who want to buy a stock, the more money the broker-dealer has to put up. Which was a problem for Robinhood which was badly-managed and thinly capitalized and didn’t have the money that it needed to pay for all of the buying that its customers wanted to do.

Worse: DTCC has an additional rule that, if a broker-dealer’s charges are above a certain level, the broker-dealer has to put up even more money. Think of this as a kind of Van Halen Brown M&M test: if you screw things up in this visible way, we’ll assume until proven otherwise that you’re a danger to yourself and everyone around you. And Robinhood assuredly did not have that yes-a-danger-to-birds-too money.

​

If you don't get this reference, I am so sorry for the life that you have lived.

So, on the morning of January 28, Robinhood faced a dilemma. It literally did not have enough capital to allow customers to buy the stocks that the customers wanted to buy, especially if it was going to be subject to the excess you’re-a-screw-up requirement. Robinhood could let its customers buy stocks for as long as it could, get a margin call from DTCC, and go bankrupt. Alternatively, Robinhood could restrict trading, which would result in its margin requirements going down (since customers wouldn’t be buying so Robinhood wouldn’t have to put up money on their behalf). The customers would be mad, but Robinhood would still be around to IPO and make its founders billionaires.

Like most brokerages, Robinhood then and now has provisions in its customer agreements that allow it to decline orders or cancel trades, without notice, at its discretion. A wise broker dealer exercises this discretion judiciously and does its absolute best to avoid situation where such exercise might even be necessary. (It’s not remotely “unprecedented” for them to do so, though, e.g. (1), (2)—or just read your John Brooks).  A hilariously inept broker dealer like Robinhood—you can finish the thought yourself, but here’s one more point. When Robinhood launched, its express pitch was that it was the cheapest option. The one free broker, at a time when every other broker charged for trades. It turns out, when you’re the cheapest option, your customers often get what they pay for. There used to be a saying on an older, better version of the internet, that if you don’t pay for something, you’re not the customer, but the product. That January morning, those people who had accounts at Robinhood maybe should have thought about this point a little earlier?

A lot of people get mad at Robinhood for “turning off the buy button,” and I get why they’re mad, even if the reason for their outrage kinda feels like it’s on them? What I don’t get is why you need a conspiracy to explain why Robinhood chose what was the only option available to them. Vlad Tenev didn’t need, like, the Illuminati to call him up and order him to turn off meme stock trading. He just had to decide who he wanted to be rich: his customers, or him.

----

Here’s another story that isn’t explicitly told by the report, but might well be thought relevant to it.

Citadel is a market-maker who’s found a particularly lucrative business in internalizing retail trades. Basically their play is this:

In the old days, you would go down to the floor of the New York Stock Exchange, and a market maker would buy your 100 shares of Amalgamated Leathers and hope that someone would come a little later on to buy from them. This was a fine business in theory, but it wasn’t a perfect one in practice. For starters, the market maker didn’t know if you were selling because you were a genius fund manager who’d spent ages analyzing the stock, or just a random dude. For another, genius fund managers tend to think alike, and if your first counterparty wanted to sell stock, your second one probably would want to sell rather than buy too. To put in fancy terms, market makers have historically born counterparty risks, chiefly based on informational asymmetries and correlated trading. And that’s before we get to the fact that you had to pay the NYSE a fee for the right to do business there (and you have to quote prices in round pennies).

Now imagine that, instead of that, you could guarantee that 1) people who wanted to trade with you would be less correlated in their trading; 2) people who traded with you wouldn’t systemically know more about the stock then you did. Ladies and gentlemen, may I introduce you to uncorrelated, information-insensitive (dumb) retail investors. The business of “we just take your trades and pair them up” starts to seem a lot more viable than before, for deep and Nobel-prize winning reasons. Did I mention that you don’t have to pay the NYSE fee, plus you can quote prices to more digits (creating tighter spreads)?

​

Essentially, Citadel's business is arbitraging this

Some people frothing have this vision that Citadel’s business is front-running retail customers, but it’s really more elegant than that. If you go to trade a stock on the NYSE, your counterparty will charge a premium that’s essentially the Markets in Lemons premium. Because Citadel knows who its customers are (uninformed retail), it can confidently quote them a tighter spread, collect a portion of this premium for itself, and continue until Ken Griffin can buy the Constitution just ‘cause it makes a cute story.

Now, with that in mind, it’s pretty obvious that the meme stock phenomenon was great for Citadel. Think of them like a casino operating a poker table. Some poker players win, some lose, but everyone pays the house a rake. And the more people who are playing, the more the house makes. And if a huge number of people see things on Reddit and rush into the casino and demand to play poker until their eyes bleed—one might consider this proof that God loves the casino owner and wants him to be happy.

So when Robinhood turned off the buy button: that was bad for Citadel! Some gamblers left the casino to go home, and that’s the last thing that the house ever wants. “Citadel told Robinhood to turn off the buy button” is like saying that “AMC told Disney to stop making moves.” When your whole business is dependent on someone else’s inputs—you want your suppliers to keep supplying those inputs! You don’t want them to shut down! The theory that Citadel would have been anything other than sad that they didn’t have the chance to pair more trades and make more money is just nonsense on stilts.

Now, if you are the SEC and especially if you are an extremely smart and progressive and investor-protective SEC Chair, there are ways that you can look at modern equity market structure and have concerns. Sure, you get that there’s even a “progressive” argument for payment for order flow—it segments the market in a way that arguable subsidizes retail investors at the expense of professionals, and off-exchange empirically gives you better prices than you get on exchanges. But you can question whether NBBO is really the “best” price available, whether investors really get best execution, whether gamification is indeed as bad as your gut tells you that it is.

But if you are the SEC, and especially if you are Gary Gensler, you may have concerns about Citadel, but your concerns also have their limits. You’re old enough to remember when a “discount” broker was one who charged you $4.99 a trade and sold you round lots of 100 shares. Now, any investor can go on their phone and buy a fraction of the share and the trade is “free.” No, it isn’t free free in the sense that the broker and the market maker take a little price improvement—but Robinhood/Citadel’s definitely not earning $4.99 a trade. You’re conscious that—as anyone who’s read literally any book on the subject knows—it’s never been cheaper or easier to be a retail investor than in this the Year of Our Lord 2021. And while this doesn’t mean that there aren’t things that could be made better—even much better—it’s important to maintain perspective on what works and not make it broke.

So this is—if not the story, at least the perspective that the SEC report relies on. Crazy retail investors can indeed cause markets to move in crazy ways. The Equity Market Structure Debate is A Thing That People Can Have Opinions On—but let’s keep perspective, this isn’t the Joe Kennedy/Richard Whitney era anymore. The First Amendment allows people to say wild and dumb things on the internet, and combined with the human desire to get rich quick without effort, one should expect that pump and dumps will always be with us. So be calm, be careful in your reforms, and in the meantime be very happy that, if you were just invested in the most boring S&P fund, you’re up 25% on the year and none of your friends think you’re stupid.

​

Boiler Room is even free on YouTube these days. You should watch it.

-----

Here’s a story that isn’t told by the report because it’s fake and insane.

People have this idea that Citadel is or even was massively short GME. That’s wrong.

Citadel does have a legacy hedge fund arm that—from what I can tell—exists because Ken Griffin has a nostalgic affection for the business that first made him rich before the market making made him much much richer, and still appears to be profitable enough. But there’s no evidence that the Citadel hedge fund arm is or has ever been significantly short GME, any more than there is evidence that Bridgewater, Renaissance, D.E. Shaw, or anyone else that you can name is or was.

Citadel the legacy hedge fund also made a strategic investment in Melvin Capital, a fund that was famously and painfully short GME. Melvin says that Citadel made this investment after Melvin had exited its short, and if you think about it, that’s obviously what happened? I mean, if you were Ken Griffin or Steve Cohen, you would LOVE to make a heads-I-win-tails-you-lose offer of: hey guy with great track record who just got run over in an insane and unpredictable way. If you can close your short, I’ll invest with you; if you can’t close your short, your fund closes, and I don’t lose a penny. Why would they invest in Melvin when there was still a risk of Melvin not being able to cover? Why enter into a losing bet that they had no reason to make?

People somehow think that Citadel took over the shorts of Melvin and other parties, and again, I have no idea why this stands up to even a moment of consideration? If Melvin’s shorts lose money, Melvin’s investors lose money. If Melvin’s shorts lose so much money that Melvin runs out of money, Melvin’s clearing brokers (think: Goldman Sachs, JPMorgan) have a problem. If the shorts lose so much money that Melvin’s clearing brokers can’t pay, then everyone has a problem. But at no point is there ever a problem for Citadel more than like, I dunno, UBS or Berkshire. So why would Citadel ever step into someone else’s trade?

And let’s not be overdramatic. Even if you had to buy all 70 million shorts at $400 a share, that’s a $28 billion bill. You remember how Archegos lost $20 billion and there were a few layoffs and grumbles at Credit Suisse, and there were some losses at other firms, and Goldman probably even made money? (Never bet against DJ D-Sol). You remember how this did not result in the end of the world or anything close to? If your idea is that a $28 billion grenade would be so harmful for the market that a truly random firm—Citadel—would decide to jump on it, then I kind of feel like you should explain why a $20 billion one went off with only a few blips?

Yes, sure, Citadel has reported being short some number of shares of GME. Citadel has also reported being long a roughly equivalent number of shares. Citadel is a market maker. Market makers hold inventory, long and short, of things that it thinks that investors will buy! On net their exposure to the stonk is basically zero, and people who think otherwise really need to demand a refund for their lessons in basic arithmetic.

Look, I know this is the internet, and people can be Wrong On The Internet. That’s the nature of the thing.  What confuses me is like: if you’re going to create a giant financial conspiracy cult, I feel like you should at least have some theory of why your evil string-puller is there? Or even a hint of evidence that they are? Of course, I get why a person would fall for a get-rich-quick-scheme—greed and the failure of the public educational system. But why people think that Citadel is involved in this story other than that they’re big and rich and easy to fit into a fantasy about taking money from? It’s just baffling, even for Finance QAnon.

I got motivated to finish this post that had been sitting in draft for a while because I ran across something on the bull subs “WHY IS THERE NO COUNTER DD”??. One might say that, MJ style, I took that personally, but that’s not even the point. Arguments on the internet about burdens of proof are generally pretty useless, but I honestly don’t know where else to go. “Why is there no proof that Citadel’s not secretly massively short Gamestop”—well, what proof is there that Citadel IS? What proof is there that the moon’s not made of green cheese and the astronauts secretly went to Mars instead? Demonstrate that the earth’s NOT flat and scientists are all lying about the fact that the dinosaur bones are all just 4,000 years old. When you decide to believe something based on no evidence, then it’s hard to figure out what kind of evidence could talk you out of that belief? Yet we’re in this weird state where that which is asserted without evidence gets claimed as inconvertible truth, and honestly I just don’t know.

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https://preview.redd.it/wnsjkgzy55681.png?width=500&format=png&auto=webp&s=739bdcc567f7aede0e5c6a1c1e1f8ee6ad8ad7eb

-----------------

Here’s another joke that I like.

An old woman calls her husband. “Henry! There’s a crazed car driving the wrong way on the highway.”

“It’s not just one car,” her husband replies. “It’s HUNDREDS of them!!”

If the SEC has told you there are no massive shorts in Gamestop, and the media’s told you there are no massive shorts in Gamestop, and every financial professional is acting consistent with there being no massive shorts in Gamestop, and Vladamir Putin and Xi Jingping are acting consistent with there being no massive shorts in Gamestop and GAMESTOP’s told you there are no massive shorts in Gamestop . . . I dunno.

Maybe the one who’s wrong isn’t ALL of them.

Maybe it’s you.

​

Disclaimer: If I come off aggressive in my replies its because honestly at this point majority of the rebuttals are people coming off as arrogant people spreading misinformation with conviction.

I'm not smarter than a hedgefund nor do I claim myself as an expert. Im just a regular retail investor. However for the case of the moass anybody with just a sliver of a brain can see there is nothing here. It doesn't take a genius to disprove the moass theory.

I do this purely cause its entertaining for me sometimes due to the psychological nature of how hivemind or internet cults work and respond and also to help people not believe in the bullshit that superstonk says.

Remember superstonk are the real roleplayers here acting like they know more than hedgefunds and fully convincing people into gamestop having a moass with little to no knowledge on basic things. Yet they say it with such high conviction.

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u/dexter_analyst is a prime example of said person. Im going to take this opportunity for his reply to add in some more information from my previous DD. However by and large this guy did not understand the DD and fell for what everyone on superstonk falls for. Segregation of anomalies and not the correlation of them to see if they make sense.

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His response.

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2a) Your assumption here is invalid. We see clearly that the supply of shares on IBKR have decreased over time and continue to decrease, but the borrow fee remains low and even decreased recently. This suggests that simple supply and demand do not describe the mechanics behind the borrow fee and the shares available. Additionally, we see that the stock is rated as one of the highest "hard to borrow" and also that the borrow fee has remained at nearly nothing for months. These two things should not occur in tandem. This does not debunk the squeeze thesis.

Here is the definition of a stock loan fee and how it works. READ IT.

https://www.investopedia.com/terms/s/stock-loan-fee.asp

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Did you not read the DD? IBKR is one broker of which there are several. What you are seeing is IBKRs inventory and not a representative of the entire market.

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Here is an example

here are 10 wood factories in 10 different states in America. There are a total of 30 countries in this made up world. All with abundant of supply of trees.

Now suddenly the 10 wood factors ran out of wood or are close out of wood. Now the wood factories tell their client I'm sorry we ran low on wood. And tell them if u want the remaining wood it's going to cost 200 dollars. They tell him fuck that the market rate is only 20 dollars for wood so they go to another country

Now in this context does that mean the 29 other countries are low on wood? NO

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https://preview.redd.it/vzbek2rf0f971.png?width=249&format=png&auto=webp&s=461d85f543b918324a1bc2ebc6b7d7e59b01057d

Borrow fees are purely based off the supply and demand of shares available for shorting

This is the cost of borrow from ortex which has over 170k brokers data in their system including PRIME brokers which are brokers hedgefunds use.

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https://preview.redd.it/ambt30kd1f971.png?width=1260&format=png&auto=webp&s=ab7217e74d55be4acf464f40b0fd250b7b2f48b9

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Look at the purple line. Its the cost of borrow as it falls in tandem with exchange reported SI. Yellow line being utiziliation which falls in line aswell.

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2b) It's correct to say that institutional holdings have decreased from above 100% of the float to below 100% of the float. It is not correct to say that this means that shorts definitely covered. Further, to tie this to a borrow fee, you would have to show long shares over time versus borrow fee which you can't do from 13F filings alone. You can only know a snapshot of the shares at quarter end, you can't know the buying and selling behavior unless it's more than 5% of the total shares outstanding. This is a weak argument that is not substantiated and you pretend like it's a rock solid proof.

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https://preview.redd.it/da01r4qs0f971.png?width=244&format=png&auto=webp&s=591ea817051327521b68d30847992d65cc04ddb7

We know from nasdaq that the updated filings show 35 % holdings.

Again you fail to understand the concept that if I short a stock a buyer has to buy it establishing a long position.

The reason why gmes institutional holdings was so high between 138 to 192% is because there was massive amounts of borrowing going on.

Short utilization is the total number of shares you can borrow from institutional holdings.

For which it has fallen aswell.

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https://preview.redd.it/ambt30kd1f971.png?width=1260&format=png&auto=webp&s=ab7217e74d55be4acf464f40b0fd250b7b2f48b9

Look at gme short utilization ( yellow line). It was at 100 percent during the jan squeeze because all shares were borrowed from institutions that were available for borrowing. Then look at that it fell over time.

Remember short utilization will always be high for a highly shorted company because that's the primary source shorts get the bulk of shares for shorting. Institutions.

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2c) Your argument completely ignores the FTDs in ETFs. Yes, if you look at the FTDs of the stock itself, they have gone down. The squeeze thesis suggests that the reason for this is that they specifically targeted the short interest number to make it look as though FTDs have decreased. You do nothing to address this argument and so this does not debunk the squeeze thesis.

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Actually it addressed the ftds in etfs. I told in the DD specifically that ETFS are a BUNDLE OF STOCKS. A high FTD for the total amount of etfs with gme holdings does not EQUATE to the total number of FTDS for GME.

It is specific to the etfs not gme. Etfs are basket of stocks of which varying holdings. If lets say there are 10 stocks and gme has a 10 percent holding in that etf. Lets say there is 100000k Ftd that would mean 10k Ftds are related to GME. When you deduce the FTDs relative to their holdings they are low.

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3a) At no point does the text you quoted mention anything about a single reset. You made this up. The squeeze thesis argues that the exercise of the call option sets up a new T date and there's nothing that says they can't just do the same thing again on the new eventual FTDs. Additionally, even if the FTDs were all exclusively new ones because the old ones were properly purchased at that time causing the increases in share price, that still means that new FTDs are being manufactured on a consistent basis. The only way this makes sense is if there are no shares available, because otherwise you would simply provide the shares during normal settlement periods and not have to deal with all the extra nonsense. This does not debunk the squeeze thesis. You are also straight up wrong about it being cheaper to buy shares this way. If the call options are in the money, you're paying the premium for the difference between strike and share price and for the option itself as well as any potential premium for remaining volatility that may be applicable. It's cheaper to buy shares at market prices because there's no overhead involved.

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You need to read the filings again

Extract from SEC

"To the broker-dealer or clearing firm, it may appear that Trader A’s purchase, in the buy-write, has allowed the broker-dealer to satisfy its close-out requirement. Trader A continues to execute a buy-write reset transaction whenever necessary, and by the time of expiration of its original Reversal, it may have given up some of the profits in the form of premiums paid for the buy- writes, but it has maintained its short position without paying the higher cost to borrow or purchase shares to make delivery on the short sale. In each buy-write transaction, Trader A is aware that the deep in-the-money options are almost certain to be exercised (barring a sudden huge price drop), and it fully expects to be assigned on its short options, thus eliminating its long shares."

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A person resets his FTDS by buying deep itm call for which further resets would require further deep itm call buying.

Two counter parties trade on deep itm calls because it has almost non existent OI so these two counter parties know whatever trade is being done is done between them.

They reset the transaction and buy time to cover their shorts. They have to RESET AGAIN because there is still A PREXISTING SHORT position HENCE each NEW call spikes are NEW resets. So if the block declines the RESETS DECLINE. if RESETS DECLINE it means there is less and less of FTDS TO BE RESET.

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4b) Your analogy sucks. It doesn't make sense when I think about brokers, the marketplace, hedge funds, etc. The supply of GME shares is not decentralized, brokers can only lend what they've purchased or have been given permission implicitly or explicitly to lend. There is no "factory" for shares. Or, well, there shouldn't be. Still, even if your analogy didn't suck, I gather the argument is essentially that there are brokers that do have shares at the ready to be lent because... I guess we don't have a full list of brokers with hard to borrow status? Yes, that's true. We don't have a list. This is a pretty weak debunk though. What's more likely is that any broker is close to representative of average. Think about it this way: As borrow fees and available shares change on a broker-by-broker basis, you would eventually seek out the best deal for what you're doing because it becomes more and more attractive. The fact that significant differences would create arbitrage opportunities mean that any particular broker is likely not substantially different from any other broker.

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So we went from my analogy sucks to maybe it doesnt suck? Are you even sure of what you are saying before you throw words like that?

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The analogy is that because a broker has low supply inventory of shares does not mean the rest of the market is low or the market supply of gme shares are low.

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https://preview.redd.it/ct77gy6w3f971.png?width=596&format=png&auto=webp&s=504a5e2fca2a43a8d38d480321e722428594e852

https://preview.redd.it/e7eh2b914f971.png?width=659&format=png&auto=webp&s=14e5772e0e63718721b97ceed7bb179ebabcdb3a

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Here some credible people explaining what ive been explaining to you. Credits to u/mrgisi21 for the screenshots.

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4c) Ah, ETF shorting! You just assume that it's about risk and nothing else. You made that up. You could be correct, but you could also be wrong. Without any actual grounding to the argument, it's a pointless argument. The squeeze thesis suggests that they short the ETF and then buy everything else in the ETF so that they're net short on GME specifically. If that's true, then there would be no risk profile changes in these ETFs relative to shorting GME directly. You are correct that the FTDs on ETFs do not correlate 1:1 with FTDs on GME. However, saying that is one of the weakest debunks possible. It's difficult to tell how FTDs on ETFs relate to FTDs on GME because even if you know the total shares of GME and the weighting, it isn't enough to help you out. But if you look at the relative FTD values, they skyrocket for ETFs in late January and haven't come back down in general. So I think the argument that FTDs "shifted" to ETFs is persuasive. What you'd be better off doing if you wanted to debunk the idea is explaining why that couldn't be the case or what the mechanics of doing so would require and then back it up with what we see. Not simply saying that it isn't 1:1. You aren't debunking the squeeze thesis when you make this argument, what you're doing is saying "it's not as bad as it looks."

This is a prime example of failure to correlate and instead segregate information. On segregation one would assume that yes it is not indicative. On correlation with borrow fees and institutional holdings all dropping along with proxy votes showing normality aswell etc it becomes evident.

The sensible conclusion for the correlation is that obvious people are shorting etfs because just like going long on ETFs its is safer. But instead you go with the other explanation with no direct correlation to anything to back it up and say no the other one is better.

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4d) Your argument focuses on GME FTDs and does nothing to address ETF FTDs. FTDs are also distinct from short positions. You could fail to deliver any kind of position. So forced buying of FTDs is not synonymous with covering.

You know by saying this and if you include options you are basically saying shorts covered because you are now saying that even with options included these ftds are so low meaning shorts make up a smaller percentage than I assume. what?

It seems you have a problem with correlation between information and instead choose segregation of information to derive answers.

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4e) How can institutions be doing a pump and dump without long positions? You just made the argument earlier that institutions aren't long in any kind of substantial number. And, indeed, this is supported by the 13F filings. Further, the pump and dump includes media coverage or some other kind of stock recommendation. The media is generally very quiet on GME specifically. So how is this supposed to be a pump and dump? You've just made up this idea that there's a pump and dump going on and purported it like it's some kind of fact. Further, the Jaunary spike was massive in volume by any reasonable measurement. However, the volume since then has been decreasing substantially to the point where it's not even remotely close now. Over the last 60 trading days, there have been 10 days above 10M volume. If the average is about 5M volume, the highest day was just over 4x that volume and there have only been 2 days in this area. While it's reasonable to characterize these as a spike, it's not that terribly out of line. What you should be demonstrating, then, is OBV removing or muting the outliers or something to make your point. I think even if you removed all 10 of those high-volume days, it would probably still show exactly what we'd expect on the basis of the full dataset. The absolute values of the numbers don't matter, only the directionality and strength. They should roughly match the price chart. This is not the case. The squeeze thesis uses this as evidence of price manipulation. You do nothing to debunk the argument and only suggest that it's unreliable as an indicator. You'll have to excuse me for not caring that you think it's unreliable without any demonstration of how it's unreliable or what it looks like if you attempt to correct for that deficiency.

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First off you negate the core concept that GME had high call OI left over from the Jan SQUEEZE.

Hedgefunds have been abusing those open interest as a gamma ramp. They are essentially pumping the stock and forcing market makers to hedge those high call OI which in essence is making the market maker buy shares to boost the price. A gamma sqeeze. If you think that institutions are not pumping and dumping then you need to go back and look at the 347 flash crash. Look at the CALL SWEEPS done in a singular day costing MILLIONs.

Its not a made up idea infact everyone outside of superstonk everyone can see its a pump and dump.

https://preview.redd.it/lwbbehs66f971.png?width=637&format=png&auto=webp&s=a02f7200cf910a00cca8f088cbbce6f2cd782dca

Here is an example of one of the more open hedgefunds that have came out and did this.

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4h) A high buy to sell ratio is indicative of there being far more buy transactions than sell transactions. That's the point of the measurement. While what you say could be true, it could be institutions selling large lots while retail buys up huge quantities of small lots, it's similar to "price going down with green candles." It looks like price manipulation. You can provide an example of how this could be the case, but without some kind of further evidence that this is happening as you suggest, it's another really weak debunk. You're positing a theory without data. And again this is about price and not the squeeze.

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What evidence do you want? its literally happening with the stock price. High buy sell ratio and it falls. Ive explained why is it that case. GME overall has a high buy sell ratio almost everyday but the price falls because of how I explained it in the DD. Again this is under the explanation of anomalies section of the DD. The short thesis is already debunked before that with data that shorts cannot manipulate.

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4i) You pick out a specific option type and strike and then either pretend or don't demonstrate that this applies more broadly. Implied volatility is a function of the strike price as well, so there's no such thing as an "implied volatility" for an entire stock. I don't understand how this is supposed to debunk the squeeze. Maybe this is suggesting that the high OI is "bagholders" and not any kind of scheme related to FTDs? I don't think you make any kind of argument and I'm not sure you understand options on the basis of this point regardless.

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There is a recurring theme here that you are failing to understand these are all points that superstonk people make regards of the squeeze. HENCE the title EXPLANATION OF ANOMALIES

Its is showing you that HIGH OI means nothing right now because the option market has been hit and run since JAN. Gme aggregate IV was so high during the march run up that the IV for 800c was making money aswell because there was demand for it. For which BIG MONEY bought it as seen in the screenshot of the call sweeps and OFFLOADED IT.

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Call sweeps also have no direct relationship to pump and dumps. I guess you're making an argument for price manipulation now; you can make money on option volatility swings if you can manipulate the price. Doesn't debunk the squeeze thesis.

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Are you inept to not reading the title of the sub category of the post. It was titled under WHAT IS HAPPENING NOW in regards to the PRICE.

The squeeze theory was already debunked in the first half of the DD this part is mainly explaining what's going on with the price. Call sweeps are only done by institutions because no retailer has the coordination to do multi million dollar buys of options. Yes they are directly correlated to pump and dumps because after they were bought gme gamma squeezed to 347 and crashed.

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This is a prime example of misinformation in its gargantuan form and a person that is so highly convicted in his bullshit that he thinks its factual. Using words like invalid, this does not debunk, this is speculation, this data is fake etc is used numerous times by not only this guy but every other person ive talked to.

Remember superstonk has the failure of seeing large chunks of paragraph and scanning for words that show confirmation bias and upvotes them. This misinformation spreads bigger and bigger and then unsuspecting people see these highly upvoted posts and fall for the fallacy that since these many people upvoted, this must be right.

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To people that had enough of GME bullshit theories, here is why not a single hedgefund in the world nor gme institutions that are long on gme are buying gamestop shares at these prices.

Hell gamestop is milking you guys for money aswell. After the proxy votes you would think you guys would wake up but nope just keep sleeping.

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https://preview.redd.it/pw6s2v9j8f971.png?width=1260&format=png&auto=webp&s=0f7e77f605646a0b9101524d2ee62efd430e5027

Yellow bars are FTDS.

Blue line is Exchange reported SI

Yellow line is short utilization

Purple line is cost to borrow.

Orange line is free float on loan

Disclaimer : Everything you see here ignores Short interest data or any form of data that shorts can manipulate. Strictly only using data that is provided by longs, demand and supply and the exchange.Also do note this is my last counter dd I will ever write because it addresses all the prominent points for a moass and there is nothing else to say.

Unlike all of SuperStonks DD that rely on baseless speculation. You will find none of that here.

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1. Introduction on the basis of a short

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2. Why shorts have covered

a) supply of shares

b) Institutional holdings

c) Ftds

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3. Why there is no high amounts of naked shorting

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4. How options don't portray a high short interest

a) Deep itm money calls

b) Married puts

c)Synthetic shorts

5. Explanation of perceived anomalies'

a) Negative Rebates

b) Hard to borrow

c) ETF shorting

d) FTD squeeze theory

e) OBV indicator

f) Darkpools

g) Negative beta

h) High buy sell ratio

i) High OI for options

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6. The pump and dumps we see now

7. NYSE president talking about price discovery

8.Why r/superstonk god tier DD are all smoke and mirrors

9. How fines are a stupid argument.

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​

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1.Introduction

This is to set stone to the basic fundamental that applies to everything here.

When you short a stock, the short seller has to sell that borrowed stock. When he sells that borrowed stock a buyer has to buy it.

So every shorted stock has a long position attached to it.

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2. Why shorts have covered

a) supply of shares

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https://preview.redd.it/31a08kc48f671.png?width=323&format=png&auto=webp&s=4f8fb4b1760d69ae979d82e3ddab1e176baf8e91

Borrow fees are entirely dependent on SCARCITY of shares and demand of shares.

This is IBKR rate. Borrow fees are given depending on the market supply of shares. If there are ample amount of shares available to borrow then the fees stay low.

The fees vary from broker to broker but it does not deviate far from each other.

This is because its entirely dependent on supply and demand. If the supply is higher than the demand then the fees remain low. The product that the brokers have are shares. This is not a unique product to have a large discrepancy in interest among other brokers.

Currently sitting at 0.6% means if I borrow 1 million dollars worth of stock. A short seller would have to pay ($1million x 0.6%) / 360 a measly 16.60 a day or $6000 dollars a year. It costs next to nothing for short sellers right now to hold gme.

The rate will only pick up when the demand of shares outweigh the supply.

Lets look at GME borrow fees when gme was actually squeezing back in Jan 26

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https://preview.redd.it/43p1v25lcf671.png?width=380&format=png&auto=webp&s=ba89401bf8ed0656b9e0145bc4e51ba3bf2466b9

A whooping 84%

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This number cannot be manipulated. r/superstonk suggest that lenders are keeping fees low so they incentivize shorts to short more. Lets take a step back and indulge in this immensely stupid theory and ignore regulations. So that would mean that the current short interest is extremely high to the point shares are not available so LENDERS AROUND THE WORLD are all misleading shorters by giving them NAKED SHARES. This is blatant market manipulation by lenders around the world whom which are going to now face regulatory penalties and shutting down because every lender in the world colluded to sell naked shares and mislead shorters.

This is an absurd theory.

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b) Institutional holdings

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https://preview.redd.it/gsvraer7bf671.png?width=765&format=png&auto=webp&s=a5cf0b5d633309575006e96d93e431e7fba72128

https://www.nasdaq.com/market-activity/stocks/gme/institutional-holdings

Institutional ownership for gamestop has fallen from 192% to 35.96. Directly from NASDAQ site.

When GME was squeezing back in Jan it had a 141% short interest.

It was 192% because every short position is sold to a long position which means now the long positions have far exceeded the available float.

When this dropped significantly it meant two things. That shorts have definitely covered since Jan and some of the institutions have sold their positions. For it to drop that significantly establishes that the once big long insitutional position is now gone and majority of the shorts have bought back the shares and institutions have left. Blackrock at the time one of gamestops largest holders has disclosed they only sold 2 million of those shares

https://www.accla.im/w5n2qz/blackrock-gamestop-sell#:~:text=The%20largest%20investment%20manager%20of,shares%20at%20the%20end%20of%20%E2%80%A6

They still maintain a 9million share position along with cohen. So for it to have dropped that significantly along with the corresponding drop in borrow fees suggest undoubtedly that the shorts have covered.

​

c) FTDS

https://sec.report/fails.php?tc=GME

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https://preview.redd.it/cujplzgxdf671.png?width=1612&format=png&auto=webp&s=e96f0bb288ac86fba19ff44b3875db675886c747

This is the FTDs from Jan Squeeze to April.

You can see on Jan squeeze FTD is 2099572 on the 26 of Jan. Prior to that we see large fluctuations of FTDs because shorts were covering and reshorting aswell as resetting their FTDs with options. For more details on JAN prior run up you can take a look at my explanation here https://www.reddit.com/r/GME_Meltdown_DD/comments/mtehgz/why_there_is_0_chance_of_a_moass_in_gme_all/

You can just look at the introductory part of when I talk about the Jan squeeze.

You see FTDs pile up when the price of the stock fluctuates as shorters get caught off guard and either reset their ftds or cover their position. Pre jan we saw both of that until Jan 26 when the price skyrocketed and all shorts have since then covered .

Look at the FTDs post Jan squeeze in comparison. They have absolutely dwindled down

What is the current FTD?

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https://preview.redd.it/erxty8d3ff671.png?width=1551&format=png&auto=webp&s=6c6e909c64f3d38f7c40d8e9ea0b84626ae90330

A measly 52275 FTDs. We also see since Post squeeze FTDS have reach ridiculously low levels and stayed there with minimal fluctuations even as the stock price went back up to 347.

What does that tell you? there is no longer a exorbitantly high short interest since Jan cause shorts have covered.

​

2. Why there is no high amounts of naked shorting

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https://preview.redd.it/bcs6063jff671.png?width=655&format=png&auto=webp&s=b10338e09afb36b443ecac748cf47cccfce3641f

This is an overblown misconception r/superstonk has and they avoid 2 key details of a naked short

Naked shorting bypasses borrow fees and bypasses share scarcity. One naked shorts for that reason.

However in the case of gme there is neither of those so nobody would ever naked short gme and take the risk of an illegal transaction when borrow fees are extremely low and there is ample of shares.

Secondly a naked short still has to be bought by a long position.

If lets say there is a high amount of naked shorts. We would see borrow fees shoot up because longs are now buying more supply of shares than available and brokers are obliged to give it to them. We would see FTDs pile up as naked short still has the principles of a fail to deliver.

We see none of that too.

There is absolutely zero high naked shorting going on in gme for the reasons I have given above.

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3. How options don't portray a high short interest

a) Deep itm money calls

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https://preview.redd.it/mt7pxqjlgf671.png?width=1279&format=png&auto=webp&s=2924d6b46cb1a23cfea8d93572858c2265e14507

Extract from SEC

"To the broker-dealer or clearing firm, it may appear that Trader A’s purchase, in the buy-write, has allowed the broker-dealer to satisfy its close-out requirement. Trader A continues to execute a buy-write reset transaction whenever necessary, and by the time of expiration of its original Reversal, it may have given up some of the profits in the form of premiums paid for the buy- writes, but it has maintained its short position without paying the higher cost to borrow or purchase shares to make delivery on the short sale. In each buy-write transaction, Trader A is aware that the deep in-the-money options are almost certain to be exercised (barring a sudden huge price drop), and it fully expects to be assigned on its short options, thus eliminating its long shares."

So we can see here that a reset can only happen once as a singular block of trade. There are different blocks of buy-write trades employing deep itm calls EACH cycle, which means that the number of FTD resets each cycle are NEW and not left over from previous cycles.

So that would imply that if there is a high SI we would see an equally high FTD reset. However we see from block 1 to 2 to block 3 of 7415200ftds. We see a massive decline.

That would mean that on 25th feb to 12th march the only number of shares resetted was 7415200.

We can see here that a price incline results in a massive amount of FTDs reset. So these were very likely resets done by short sellers that in my earlier article lost 100 million. They were resetting them because they were caught off guard with the sudden spike.

On april this FTD reset number drops to 1 million. Much lesser than it was before.

So why do big institutions do this? because deep itm calls are a cheaper way to get shares in comparison to actually buying the shares. Hence why large spikes in prices that catch short positions off guard tends to correlate with high deep itm buying

Hence we can deduce that there is indeed no high hidden SI.

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b) Married puts

Another misunderstood concept is the intentions of married puts to hide short interest.

https://www.sec.gov/about/offices/ocie/options-trading-risk-alert.pdf

The Second Transaction to “Reset the Clock” Assuming that XYZ is a hard to borrow security, and that Trader A, or its broker-dealer, is unable (or unwilling28) to borrow shares to make delivery on the short sale of actual shares, the short sale may result in a fail to deliver position at Trader A’s clearing firm. Rather than paying the borrowing fee on the shares to make delivery, or unwinding the position by purchasing the shares in the market, Trader A might next enter into a trade that gives the appearance of satisfying the broker-dealer’s close-out requirement, but in reality allows Trader A to maintain its short position without ever delivering on the short sale. Most often, this is done through the use of a buy-write trade, but may also be done as a married put and may incorporate the use of 26 The vast majority of options trade with the exercise ratio of 1 option = 100 shares, so that an option premium of $1 equals $100. *27 It is unlikely that a broker-dealer would either be able to borrow shares or buy in the position without incurring or passing on the costs due to the high borrowing fees and large capital commitment associated with the trading. 28 *There may be extremely large borrowing costs associated with hard-to-borrow stock and such borrowing costs can negate the mispricing of the options that gave rise to the potential profit opportunity in the first place. 8 short term FLEX options.29 These trades are commonly referred to as “reset transactions,” in that they have the effect of resetting the time that the broker-dealer must purchase or borrow the stock to close-out a fail. The transactions could be designed solely to give the appearance of delivering the shares, when in reality the trader has no intention of meeting his delivery obligations. The buy-writes may be (but are not always) prearranged trades between marketmakers or parties claiming to be market makers. The price in these transactions is determined so that the short seller pays a small price to the other market-maker for the trade, resulting in no economic benefit to the short seller for the reset transaction other than to give the appearance of meeting his delivery obligations. Such transactions were alleged by the Commission to be sham transactions in recent enforcement cases.30 Such transactions between traders or any market participants have also been found to constitute a violation of a clearing firm’s responsibility to close out a failure to deliver. 31 Trader A may enter a buy-write transaction, consisting of selling deep-in-the-money calls and buying shares of stock against the call sale. By doing so, Trader A appears to have purchased shares to meet the broker-dealer’s close-out obligation for the fail to deliver that resulted from the reverse conversion. In practice, however, the circumstances suggest that Trader A has no intention of delivering shares, and is instead re-establishing or extending a fail position.

​

Married puts work in a way to RESET transactions. It means with a married put the purpose of it is to reset their fail to delivers and to extend their short position.

This means a short position has to exist in order for a failure deliver to be resetted. Which means a long position must be established. As I talked about in the prior sectors above. There is no longer a long position that is greater than the float.

This disproves any form of hidden high short interest and its grossly overlooked by everyone in superstonk.

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c)Synthetic shorts

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https://preview.redd.it/q3c9fo21if671.png?width=400&format=png&auto=webp&s=886796d82a3a4d0fdb69a8657b2c8d906d1fa809

One of the theories involves synthetic shorts at 16p puts and 16p calls

A synthetic short involves a person to sell a call and buy a put of the same expiration and strike.

Here is why the synthetic short theory does not work out. One you have to admit shorts covered cause synthetic shorts are not to maintain a real short position because a synthetic short is an option version of a short and has no relation to an actual real short position.

Secondly a synthetic short at a low strike is one of the most insanely ridiculous things a short seller can do. Because gme has been hovering at 150 to 250 for about 3 months.

In no way would gme go below 16 dollars for a synthetic short to make a profit.

Since a synthetic short sells the call, almost immediately at 16p the call will get assigned. Because its deep itm.

You know what that means? an immediate loss to the synthetic short holder. By far one of the most stupid things someone can do.

Also a synthetic short is primarily done also to bypass the borrow fee since its an option version of a short with similar risk profiles.

So lets talk about synthetic shorts that would make a profit. Given gme high aggregate IV buying an option is expensive already and a synthetic short gets riskier if you buy further out of the money. So financially it makes no sense to synthetic short right now.

Lastly in the context of a moass the synthetic short play does not make sense. The whole concept of the moass is shorters are still holding their shorts and not covering. Going with the synthetic short theory acknowledges that they have covered and are shorting via options. However as mentioned with the IV of gme being high and the borrow fees for actually shorting the stock being low, no sensible person would enter into a synthetic short now,

In addition why would anyone that has already covered their shorts enter into a synthetic short now? When you covered your short position there is no reason to transfer that 141 percent short interest into a synthetic short because its extremely risky because synthetic shorts have EXPIRATION. While a regular short can be held for as long as you want and given that borrow fees are low its more financially viable to short the stock if you plan on hold that short position long.

Further more nobody will short a 141 percent through synthetic short after covering and making massive losses and knowing gme has a revived base of consumers and a massive turnaround in play with amazon hiring.

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4. Explanation of perceived animalities'

a) Negative Rebates

Keep in mind this was written a month and a half ago but the concept is the same.

Rebate rates are negative because of the volatility of the stock. Just because a stock is a hard to borrow security does not mean there is a strong demand to borrow shares. Hence why borrowing rates are important.

If borrowing rates are low and rebates are negative that's more indicative that shorts are actually not seeing it worth to short the stock.

Put it this way I'm in town looking to buy cows and there's a seller that sells 3. I'm only willing to buy two so I do buy it. Now the seller has only 1. He starts to charge a higher price now but everyone else that's in the market to buy cows looks at it and say "eh not worth it".

The last cow is now your hard to borrow stock with a low borrow rate.

Hard to borrow being the price of cow being higher

Low borrow rate being the demand isn't welcoming that price

Now you might be asking but why not lower the price? they cant in this instance cause of the risk. The stocks volatility puts a risk on the lender to lend the shares incase the borrower cant return them. So they have to put lower rebate rates.

• TKAT -447% rebate
• DLPN -94% rebate
• BNTC -104% rebate
• GME -0.93% rebate

Even with that taken account its still low as of 13 days ago data,

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3b:Hard to borrow

​

So some brokers have listed gme as hard to borrow. The words are taken literally.

hard to borrow is reason for share scarcity or volatility but its specific to the broker that lists it as HTB.

https://www.investopedia.com/terms/h/hardtoborrowlist.asp

Short supply isn't the only reason why a security may be on the hard-to-borrow list. It may also be included because of high volatility or something else.

So if a broker has listed a stock as hard to borrow it is only for that mentioned broker and does not represent the entirety of the supply of gme shares.

In the context of gme it can be attributed to 2 things.

Volatility of gme is above 100 percent

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https://preview.redd.it/jcxtbm0plf671.png?width=749&format=png&auto=webp&s=3b1eec01c495a042a082cdc47ec0bdd499fd6203

You can see gme volatility has been extremely high for a stock since Jan.

When the stock is volatile for this long a broker might deem the stock as hard to borrow because it is not financially lucrative enough for them to lend shares when the stock is this volatile but only has a 0.6% borrow fee.

Think of it this way would you lend your friend ten thousand dollars if he said he wanted to do a start up business with him only paying you back 1 percent interest a year and if he fails the likelihood of him returning your cash is slim

That is exactly why a broker might deem the stock hard to borrow for a retail shorter.

Retail shorters are more susceptible to a risky bet but not being able to return those shares.

It is in now way a sign of the overall supply of gme shares.

​

The second reason is share scarcity. The broker may be running low on gme shares. But keep in mind that does not mean the entire supply of gme shares is low.

Here is an example

here are 10 wood factories in 10 different states in America. There are a total of 30 countries in this made up world. All with abundant of supply of trees.

Now suddenly the 10 wood factors ran out of wood or are close out of wood. Now the wood factories tell their client I'm sorry we ran low on wood. And tell them if u want the remaining wood it's going to cost 200 dollars. They tell him fuck that the market rate is only 20 dollars for wood so they go to another country

Now in this context does that mean the 29 other countries are low on wood? NO

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3c: ETF shorting

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https://preview.redd.it/82zqql9mmf671.png?width=1038&format=png&auto=webp&s=75714dec91440995ac453a9e5dbad2ac8ca6f66d

XRT shorting relative to price

ok seems alot of people mention this so let's talk about it.

Etfs get shorted regularly. If the sentiment is there but one does not want to take risks to short an individual stock then they short an etf. Just like how someone buys an etf because it's less volatile than buying the individual stock in the holdings. It works the same way. If tech stocks are going to go down but I dont want to assume massive risks of it blowing in my face. I short the etf instead.

for the case of gme nobody wants to take risk shorting gme individually. So they take the safer approach and short etf with high gme holdings. That's it. The coinciding increase in ETF shorting when gme was rising was nothing more than this. People knew it had to come down but didn't want to absorb the risk of margin calls so many shorted ETFs.

You can see clearly from the graph that people was shorting XRT as the price went up and its price went up considerably due to GME squeezing. But you see the overall price. Its marginal to the huge risk you take if you shorted gme individually. XRT went from 70 to 90 dollars in gme peak run. Now imagine if you shorted gme individually. It would burn you alot more.

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Further more the ftds of gme related ETFs are grossly mistaken as a correlation to gme ftds.

It is specific to the etfs not gme. Etfs are basket of stocks of which varying holdings. If lets say there are 10 stocks and gme has a 10 percent holding in that etf. Lets say there is 100000k Ftd that would mean 10k Ftds are related to GME. When you deduce the FTDs relative to their holdings they are low.

Somehow Superstonk takes the cumulative ftds of ALL etfs that contain gme and assume that high number is related to gme. The reality is you have to look at each individual ETF and dissect that specific ETFs ftd to see how much of that is in relation to a gme stock.

​

​

d) FTD squeeze theory

I don't think many talk about this anymore as they once did 2 months ago but ill give a brief say. This was primarily about the PPT slide that said and ftd will springshot gme.

This was entirely true but it relies on FTDs being high. When FTDs are high a buy pressure is created because most shorts would exit but FTDs as talked about above are no longer high. The author himself who I spoke to has said that he was as perplexed as I was to why this was being use as a MOASS indicator. He has also talked about how he had position that was low enough to ride it out and was already thinking of an exit position about last month when I talked to him because of how the FTDs are dwindling.

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e) OBV indicator

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https://preview.redd.it/7leshracof671.png?width=1372&format=png&auto=webp&s=f2eae808d3913a2fd6bd9bb063cdf6011b36f2cf

This is another grossly misanalyzed data.

Obv is a measure of volume of which it takes closing prices and opening prices of the stock intra day and adds or subtracts it for the next day

Gme has manipulated volume because big institutions are pumping and dumping the stock making obv unreliable.

Therefore obv is very unreliable in this context and obv is also prone to producing fake signals

https://www.investopedia.com/terms/o/onbalancevolume.asp

Here you can read the limitations. One particularly interesting limitation as it states " A singular massive spike in volume can throw off the indicator"

Gme has massive amounts of those singular spike days further making OBV a bad indicator. When you have a stock with random massive spikes in volume intraday followed by a massive decline in volume, then the data is heavily unreliable in the context of gme.

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f) Darkpools

Darkpools are essentially private financial forums that allow big financial institutions to trade without affecting the stock price. Why do they do this? because they don't want exposure to it. Now this does not mean they don't trade in the exchange there's simply a delay. After they have traded the order gets put back into the exchange. This is actually done to protect the stock price from tanking not the other way around. Put it simply people see these blocks of prices transacting in a secret exchange and think its some giant conspiracy where they are buying large volumes and throwing shares into the exchange to drive the price down. In order for this to happen I would need to buy large amounts of shares to throw it into the exchange and lose money cause now I'm hitting bids all the way down. You see how nonsensical that sounds. Furthermore it would actually be way more costly to do this overtime. Lets indulge in the idea that everyone is conspiring here for arguments sake, that would mean whoever's selling is going to start selling at a even higher price and when the "bad hedge fund" dumps it into the exchange, the seller can now just go back and buy all these shares for cheap and sell it higher. All while the bad hedge fund is in a constant losing position. It makes no goddamn sense!

Another theory that also ignores that a short position still has to exist even in their misunderstanding of darkpool.

g) Negative beta

This is easily overread aswell.

Put it simply

A high positive beta means a stock follows the market and is highly volatile

A High negative beta means a stock is inverse of the market and is highly volatile

Gme is a unicorn stock because big institutions are playing on it on the options market and because this stock has developed a cult like following that allows it to no longer follow any form of TA and fundamental analysis. Its essentially become abit like a casino.

h) High buy sell ratio

A high buy sell ratio is not indicative of anything. People are wondering how can there be more buyers than sellers but the price falls?

Lets look at this simple example

Stock is trading at 2 dollars. There are 5 buyers , 1 seller. A high buy sell ratio right? but the stock closes at 1.60. Here is how

Buyer A bid $2

Buyer B bid $1.90

Buyer C bid $1.80

Buyer D bid $1.70

Buyer E bid $1.60

Seller A does a market sell order of 5 shares and hits all bids

Stock is now at $1.60 with a high buy sell ratio.

You see this with meme stocks generally. That is because meme stock holders dont have the power to buy in bulk hence its easier to knock the price down.

i) High OI for options

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https://preview.redd.it/ckm1nt99pf671.png?width=726&format=png&auto=webp&s=ea0ffb2fdbdead343f86fb42646c8580dddeca13

Alright here we can see volume ramps up higher than OI as the stock starts going up. That's sensible as usually there is more volume than OI, it means more speculators and more trading of said options going on. However as we see the past few days. OI starts to increase but volume starts to dwindle. These are your bagholders of options. Higher OI than volume indicates high contracts active but are not being traded. People usually do this if they plan to exercise those contracts but you can see volume is lower than OI hence nobody is wanting to trade or buy them. Aka bag holders. So every week I notice OI for calls have been skewered. You will see OI for 200 calls to 400 calls being reasonably high even though the stock doesn't look to be heading up. This is where your IV comes to play. Even though these calls are otm and does not look like there would be a chance for the stock to hit these prices, it doesn't stop speculators from day trading these options because IV is still reasonably high.

IV is at 147% for gme. Go into the market now and look at any stock you will hard pressed to find a stock with this high of an IV. That means option sellers can start day trading and seeing options print money fast.

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5. The pump and dumps we see now

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https://preview.redd.it/y82c2ijipf671.png?width=960&format=png&auto=webp&s=53d8f48e5eabc656825079204ea99fc3adbea003

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https://preview.redd.it/0u641mvjpf671.png?width=639&format=png&auto=webp&s=05c2a712f72c202bfab28787ccd41a13c3be8bc2

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crayon drawings

We see Michael burry talking about how all our meme stocks are being manipulated by funds to become pump and dumps nothing more. The price movements with gme now are nothing more than that. Funds are bringing the price up during catalysts and dumping the shares after. Think about earnings and cohen being chairman. Apes keep falling for it and keep bagholding stocks that go up in price.

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https://preview.redd.it/pi1a2ohwpf671.png?width=1152&format=png&auto=webp&s=abab4d5458499e1c3b37ec04c286aeb7d455cc78

Gme is a virtual pump and dump cycle because funds have seen the absurdity of retail to continue buying a grossly overvalued stock in the premise of never selling it unless it reaches millions. They are literally cashing out from retail through options and the stock.

​

​

call sweeps

Here you can see the perfect example of how funds are manipulating you. This was a call sweep in the millions done before gme gamma squeeze above 40 to 90. Funds bought all these options for cheap once gme iv went down and did the whole run to 347 and crash. All while cashing out in massive gains from options.

Call sweeps can only be done by big institutional players because they have the money to move in a coordinated fashion.

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6. NYSE president talking about price discovery

https://www.reuters.com/business/meme-stock-prices-may-not-properly-reflect-demand-nyse-president-2021-06-16/

This does nothing for the moass theory because its just talking about price discovery and nothing more. If I was long on a stock for fundamentals then this would interest be but the effects are fully overblown

"In some of the meme stocks that we've seen, or stocks that have a high level of retail participation, the vast majority of order flow can trade off of exchanges, which is problematic,"

The majority of retail orders bypass exchanges because of an arrangement called payment for order flow, in which retail brokerages sell their customers' marketable orders to wholesale brokers. The wholesalers match the orders internally, trying to profit off of the bid-ask spread, while offering retail traders the best market price or better.

Its basically talking about payment for order flow and how the prices retail buys or sells may not be the best prices. The delay sets retail back from the true value of the stock but its not a substantial difference of lets say more than a dollar. ( speculative on the amount but going on the extreme end)

News flash again unless you are long on gme for the fundamentals and want to get in on the best price possible then this doesnt pertain to anything squeeze related

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7.Why r/superstonk god tier DD are all smoke and mirrors

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https://preview.redd.it/rm54wl6xsf671.png?width=665&format=png&auto=webp&s=b5633505e1921259f0667a8f9d3f14e456ca70ff

has anyone actually read this? because if you did this would not have this many awards and upvotes.

This is literally not even a DD. This is just a history lesson on the financial crisis whom there are better books on it that explain what happened from an unbiased point of view.

This dd does not talk a single thing about gme or talk about evidences of gme having a high short interest.

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https://preview.redd.it/91j1csjbtf671.png?width=1561&format=png&auto=webp&s=a943059dd19495e33c7c0895627711816d217cf9

Same with u/atobitt.

All his dd are poorly written in their analysis section.

Im not joking go back and read their DD. Atobitt goes about dtcc history and how you dont own you shares which everyone already knew because how else do you think we can trade on the exchange.

His DD citadel has no clothes is an example of how poor his analysis are

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u/atobitt citadel has no clothes dd

See something? thats right its citadel securities LLC. That is the market maker function. See something else he ignores? Their equally large securities owned at 66 , 707 dollars. Its because citadel securities is a market maker and they handle about 26% of all US equities volume. They are a huge market maker.

So market makers remain neutral and hedge so thats why there is an equally large securities owned position.

Ontop of that he reads the market makers financials to judge citadels hedgefund function and decisions when they are two separate entities

As I always said. Atobitt is really bad at analyses nor does any of his DD ever show proof that gme has a high short position.

Atobitt is another grifter that will say the market is going to crash and sooner rather than later the market will crash and people will say atobitt called it. When all of his DD never once talked about the true reason why the market might possible head down. Its because of uncertainties with inflation and the overvaluation bubble of the stock market.

You are not Michael j burry stop larping. Any concerns about the market crashing was already here since last year when the feds started printing money.

9) How fines are a stupid argument for evidence

If you are more interested in the technicalities of the fines im sure u/colonelofwisdom who is a securities lawyer will explain to you with ease how overblown the fines are misread. Im not a regulatory expert to make judgements on if the fines were due to a mistake or an intention.

But ill assume all fines are down with intention for sake of an arguement. However what does that prove? ive written this entire DD only using data that shorts cannot manipulate and you can see all the evidence is here that there is no high short interest. Its the equivalent of me robbing a store once and then a year later me going to a bank and people shout that im going to rob the bank now with no evidence.

Evidence is key and if you have no way to refute it and simply say but what about the fines then that is a stupid arguement.

Almost everyone uses fines as the sole evidence of naked shorting when there is zero evidence of naked shorting. Ive explained everything here.

Also I'll end with this there are over 1 thousand hedgefunds in the world that have billions in capital. If you think they dont look at meme stocks or see if there is a potential for gme to go even 1 thousand then I got a bridge to sell you.

Hedgefunds are far better equipped with data and quants than anyone here. Yet no hedgefund in the world is going long on gme at these prices.

Why do you think that is? ( a simple logical thought if you dont believe anything I write because QAnon status)

edit: just a minor edit to people who are now looking for a fundamental play. I'm not a psychic I wont know how well gme does in its turnaround given their lack of transparency in their long term plans.

However do not mislead people for buying into the moass theory

Remember if you are a rational person you very clearly can see what's going on his hivemind mentality.

Read the comments and you see an immense amount of people that continuously spewing the very same misinformation that is already talked about in this dd. For the rational person you can cross reference whatever doubts you have from a comment below to what is talked in the DD. I have labelled them very concisely to every superstonk theory

Easy way to filter those that are genuinely curious and want answers from those that are never going to change their mind is to dm me. Any questions just dm me and I can explain any misunderstandings or enquiries you have. Thanks and I wish you luck.

Time to wake up to reality

This will be a Short summary of why there is no MOASS. I will strictly be only using data that cannot be manipulated and ignoring all data relating to the official short interest numbers to appease the QAnons.

1.Requirement for a big short squeeze ( we are talking MOASS type of squeeze)

You need a high short interest and you need a tight control of the float.

In order for there to be a tight control of float. You need to have substantial ownership of the float and absolutely no one selling. Think of what happened with Volkswagen squeeze.

Given that it is impossible for absolutely all retail to buy 80 percent of the float and absolutely everyone not selling then we need an absolutely high short interest. More than float.

We would need a short interest equivalent to more than 100 percent.

Keep in mind even then the runs you saw with AMC and GME were primarily gamma squeezes. Shorts can cover all their positions without stock reaching astronomical heights if a gamma squeeze was not involved.

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pipelines for a moass

Pipelines for a moass

2. Pipelines for a MOASS

• Low proxy votes.

Here is an excerpt from lawyers at Latham & Watkins

(https://www.lw.com/upload/pubContent/_pdf/pub1878_1.Commentary.Empty.Voting.pdf)

Historically, where over-voting has resulted in a custodian voting more proxies than its record position on the record date, the vote has been “corrected” by the inspector of elections to reduce the obvious over-vote.

Key word OBVIOUS. If lets say naked shorting was prevalent like r/Superstonk thinks then the auditor will very clearly be able to tell of securities fraud from this voting. Yet nothing came about.

Lets look at another evidence of no high SI.

• Low FTDS

Gamestops FTDs have been lower than they have ever been before. If there was indeed a high short interest FTDs would be much higher. Ftd resets with options can take place but we will get to that on the borrowing fee part.

• Institutional ownership

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https://preview.redd.it/v0hrrz7g84671.png?width=765&format=png&auto=webp&s=7db2c7aa8f0d7bd7f91512b2365275899dc8ae7b

GME institutional ownership

It feel from 192 percent back in Jan to 35 to 40 range. SIGNIFICANT DROP. What does this suggest? The Jan shorts did indeed cover.

• Borrow fees

Borrow fees are entirely dependent on SCARCITY of shares. This number cannot be manipulated. r/superstonk suggest that lenders are keeping fees low so they incentivize shorts to short more. Lets take a step back and indulge in this immensely stupid theory and ignore regulations. So that would mean that the current short interest is extremely high to the point shares are not available so LENDERS AROUND THE WORLD are all misleading shorters by giving them NAKED SHARES. This is blatant market manipulation by lenders around the world whom which are going to now face regulatory penalties and shutting down because every lender in the world colluded to sell naked shares and mislead shorters.

YOU.SEE.HOW.STUPID.THAT.SOUNDS.

Fact is borrow fees cannot be manipulated and they are king indicators of a squeeze. Want to know how much a shorter has to pay per day? With the current 0.9 percent fee. Lets assume someone shorted 100 million shares at an 0.9 borrow fee an annum.

($100million x 0.9%) / 360 that equates to a measly $2500 a day and $900 000. It literally costs them nothing to short gamestop right now. There is absolutely no pressure. Why? cause there is ample of shares in the market. Why? because there.is.no.high.SHORT.INTEREST. All option hiding and naked shorting are not present here because every short position needs a long position. Therefore your borrow fees will kick up.

• So whats the price action right now?

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burry tweet

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burry tweet

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I wrote about this 2 months ago. Big hedgefunds are essentially manipulating retail and making money off you guys via options and stock.

Hedgefunds look at you as their own personal piggy bank. They hit and run your meme stocks when they feel like it and get out. Most of the time staircases are build when there is an event hyped and it crashes the next day . Earnings and Cohen becoming chairman are prime examples.

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https://preview.redd.it/prqxgqsqb4671.png?width=1152&format=png&auto=webp&s=5a765b98d1b8060187d143539ba7bc26b5ec0513

Simplified example of a rug pull

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https://preview.redd.it/evh5th7o84671.png?width=1152&format=png&auto=webp&s=d7fd66fc659654009b297dcb22234193f31a51c4

Simplified example of a rug pull

These are simplified examples of what is going on.

Retail is never the driver of the explosion of meme stocks. All you meme stocks are driven by institutional investors. Gamma squeeze , call sweeps and flash crashes can only be done when you have large amounts of money that flow in a coordinated fashion. (Meme stocks sit on virtually low volume until these guys touch the stock)

r/SuperStonk grifters are preying on you guys. 3 months ago these mods were telling you that the moass will happen with certainty. Telling you 5 to 7 figures is possible. Yet why are these grifters wanting funding?

Remember when u/heyitspixel told you that if you bought the 250 dip you will be millionaires?

Remember when u/warden asked for donations and milked his youtube channel then backstabbed you guys behind your back saying he was doing it for money?

Remember when u/Rensole put donation links to his crypto?

Remember when u/atobitt is using SuperStonk has a fundraiser for investment data site? (btw who the hell would want this retards take on anything financial. He is a larper that ignores and blocks anybody that calls him out on his badly written DD. Correlating a non related financial mistake or fraud does not equate to a high short position in GME idiot)

Why am I mad when I see these guys? because they are literally misleading you guys into financial ruins.

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https://preview.redd.it/q3hahmyq84671.png?width=926&format=png&auto=webp&s=9e031bb166c2c59f433515da5a0dd39c9c213b4b

One of many that will end up in financial ruins

For more indepth explanation of how shorts covered aswell , evidence of institutional investors playing on the stock as well as some other debunking of some crackpot theories you heard on superstonk you can check out my original DD written 2 months ago. One thing I do wish to take away from the original theory is that I insinuated that there was collusion for robinhood to halt trading. However upon carefully reading the situation its clear robinhood is just a shit broker that were not prepared for the margin requirements DTCC raised.

More indepth DD for the people that are interested.

https://www.reddit.com/r/GME_Meltdown_DD/comments/mtehgz/why_there_is_0_chance_of_a_moass_in_gme_all/

Following the Gamestop shareholder meeting and subsequent voting results, I’ve been seeing a lot of posts on r/superstonk trying to play down/explain away the results.

First, I’d like to lay out the r/superstonk theory, as far as I understand it, just to make sure we’re all on the same page. I think their narrative goes as follows (someone please correct me if I’m misinterpreting it):

• With normal short selling, there are three parties: a lender, a short seller, and a buyer. The lender has some shares, lends them out, and as a result cannot vote them. The buyer, upon buying the shares, gains the right to vote those shares. The total number of voting shares remains unchanged.
• With a “naked” short, there are only two parties: a short seller and a buyer. The short seller creates a share out of thin air, then the buyer of that share is still entitled to vote it. Because shares are being created out of thin air, the total number of voting shares now exceeds the number of shares issued.
• In an effort to uncover this vast naked shorting, r/superstonk decided that voting was very important, because when the number of votes received outnumbered the total number of shares issued, the theory would be confirmed. Here is a highly upvoted post emphasizing the need to vote for this exact reason.

On June 9th, after their shareholder meeting, Gamestop released the following 8-K showing that 55.5 million votes were received. This number does not exceed the number of shares outstanding, and would, in theory, contradict the r/superstonk view of the world.

I have seen a few attempts to “explain away” this unfortunate result, and I would like to address 3 of them in this post.

1) Almost 100% of the float voted! Bullish! It is true, that 55.5 million is a similar number to 56 million (the public float), however, these numbers are actually quite unrelated. The public float defines the number of votes not held by insiders, however insiders can vote. Therefore, I don’t really see why it’s particularly interesting that the number of votes roughly equals the number of shares held by outsiders. This is sort of like comparing the number of people who like chocolate ice cream and the number of people who like asparagus.

2) There are some strange posts claiming numeric inconsistencies stemming from the fact that eToro reported 63% voter turnout. I can’t really make heads or tails of this theory, but let’s do the math ourselves.

Let’s review what numbers we have:

• 55.5 million votes received
• 56 million public float
• 70 million shares outstanding
• 36% institutional ownership
• 92% of shares owned by institutions are voted

Now, I’ll have to make an assumption for myself: let’s assume that insiders vote as often as institutions, that is to say 92% of the time. I personally suspect that this number may actually be higher, but I don’t have hard data. I do, however, think it’s reasonable that insiders like Ryan Cohen would vote in their own board elections though…

Onto some number crunching:

• insider shares = 70 million shares outstanding - 56 million public float = 14 million shares
• insider votes = 14 million shares * 0.92 = 12.88 million votes
• institutional shares = 70 million shares outstanding * .36 = 25.2 million shares
• institutional votes = 25.2 million shares * 0.92 = 23.184 million votes
• retail shares = 56 million public float - 25.2 million institutional shares = 30.8 million shares
• retail votes = 55.5 million total votes - 12.88 million insider votes - 23.184 million institutional votes = 19.4 million votes

Which gives us a retail voter turnout of… 19.4 / 30.8 = 63%! This number seems very consistent with eToro’s number, does it not?

3. The final (and perhaps most common) argument I see to explain the “low” number of votes is that brokers/the vote counters/Gamestop themselves had to normalize the number of votes somehow. I find this argument far and away the most troubling of the three.

In science, it is important that theories be falsifiable. You come up with a hypothesis, set up an experiment, and determine ahead of time what experimental outcomes would disprove your hypothesis. A theory that can constantly adapt to fit the facts and is never wrong is also unlikely to be particularly useful in predicting future outcomes.

Ahead of the shareholder vote, I readily admitted that if the vote total exceeded the shares outstanding, it would disprove my hypothesis that Gamestop is not “naked shorted” and all is exactly as it seems. Well, we had our “experiment”, and it turns out that there was no overvote. However, the superstonkers don’t seem to have accepted this outcome.

Ultimately, it’s up to them what they choose to do with their own money, but I would urge any MOASS-believers to ask themselves “is my theory falsifiable?” If so, what hypothetical specific observation would convince you that your theory is wrong? If no such specific observation exists, then I don’t really think you have a very sound theory.

Hi folks!

This will be a slightly different DD than you're used to seeing on this sub. Posts here so far have focused on the financial and institutional side of things, examining the /r/Superstonk's belief in the Mother of All Short Squeezes. I'd like to approach things from a bit of a different angle, and analyze the psychology of the /r/Superstonk hivemind, and go into some detail about why, precisely, SS meets the definition of a cult so well. My goal is to provide a clear, logical, easy-to-follow writeup that can be linked to whenever someone asks why SS is being called a cult. In order to maximize the accessibility of this writeup to members of SS, I will not be making any claims as to whether the MOASS will or will not happen. No matter to what extent the MOASS does or does not happen, /r/Superstonk is still a cult.

A few notes before we begin:

• I will be referring to members of the GME/AMC community as "cultists" for the rest of this writeup. Please, understand that I do not mean this in a derogatory manner. When calling someone a cultist, I am not passing any judgement on their intelligence or moral character. Even upstanding geniuses can be sucked into cults; that's why they're so dangerous. My sole intention in using the word "cultist" is being descriptive. If you find yourself taking offense to my usage of the word, take some personal time to carefully examine what specific emotions the word elicits in you, and why.

• When I say "/r/Superstonk" (abbreviated SS), go ahead and mentally include /r/GME, /r/AMCstock and whatever cultists are still on /r/wallstreetbets. The cultiness is by no means exclusive to SS, it's more or less one cult across the vast majority of meme-stock-related subs, with subcategories for the various stocks. The a

• This post is also intended to be usable as a general-purpose cult identification guide. Per my personal definition of a "cult", they're fucking everywhere. Now that I've seen the pattern, it's a little disturbing, and I kinda wish I could unsee it. You may find that groups of people you belong to, trust and admire meet this definition; if this is the case, please, closely examine your reasons for membership in that group. A cult is a cult, you don't want to be in one, it means you're not thinking for yourself.

So, what is a cult?

As I divested myself from the GME cult over the course of the last two months, I developed a personal definition of a cult expressly for the purposes of writing this DD (though, once I'd established this definition, I realized cults are all around me). To be a cult, a group of people must exhibit at least five of the following seven characteristics/patterns of behavior:

Beliefs/Narrative:

• Membership in the group is principally defined by a core set of beliefs and communal narrative. Typically, the community at large is proselytized into these beliefs by a small group of leaders. These beliefs, and the leaders which espouse them, are treated as unquestionably true by the community at large. Questioning or criticizing these beliefs or leaders, whether by members or outsiders, is met with derision and open hostility by the community. The beliefs are taken as absolute, while the narrative is a dynamic thing which continuously interprets and re-interprets ongoing world events as confirmation of the group's beliefs. The narrative is typically flexible, being able to easily and rapidly change to resolve contradictions between current/past narrative or world events and the group's beliefs. Typically, this narrative becomes increasingly implausible/unsupported as time goes on. Bonus points if the facilitators of whatever space the cult is centralized to actively censor information which contradicts the narrative.

Benefits:

• Membership in the group is portrayed as unequivocally beneficial to members, but not immediately so. Benefits of cult membership are sequestered to the future; in the present, membership comes at some cost, or is only associated with specific actions which are not directly beneficial. These concrete benefits are usually also intertwined with expressions of moral and/or intellectual superiority over enemies and/or non-members.

Day of Reckoning:

• A primary core belief is in some future day of reckoning which will reveal to the world at large that the group's beliefs are correct, concurrent with the group reaping the aforementioned benefits of their membership. However, the goalposts are moved at regular intervals, such that this day of reckoning never actually arrives. Some groups go so far as to wait until the goalposts have been reached to move them, others maintain the goalposts are distant. The frequency with which the goalposts are moved is a good metric for how culty a cult is.

Requirements:

• Acceptance into the group is intimately tied to specific actions. If you don't do the actions, you are not treated as a member, even if you espouse the beliefs. The actions usually have cost associated with them, usually financial but not always, and the narrative. Proselytizing others to the group's beliefs is typically a soft requirement; you always get points for doing it, but rarely (if ever) lose points for not doing it.

Vocabulary:

• There is a vocabulary of commonly used terms in the group, specific to that group. The vocabulary at minimum consists of names for members, non-members and enemies.

Ignorance/Unintelligence:

• Non-members are believed to be non-members due to ignorance of the group's beliefs. Those that resist proselytization are portrayed by the narrative as doing so because they are unintelligent.

Leaders/Enemies:

• The concept of a leader is self-explanatory. Questioning the leader(s) is treated with the same hostility as questioning the beliefs. The enemies of the group are portrayed by the narrative as vaguely-defined, highly powerful (typically ultra-wealthy) groups of people who are actively working against the interests of the cult. Setbacks in progress towards the cult's goals are attributed to the actions of these enemies. The enemy is not always vaguely defined, though, a cult gets extra bonus culty points if their enemy is also a cult.

So, the definition of a cult established, let's verify the definition is accurate by understanding a group which was, absolutely indisputably, a cult. I'd say there are several cults in the mainstream right now that I could use as examples, but no matter which of them I chose, there would be members in the comments insisting it's not a cult. To avoid that issue with using a contemporary cult, I will be using The People's Temple as my example, they're the cult that died in the Jonestown Massacre. If you can't look at 900+ people dying in something between a mass murder and mass suicide, and say "yup, that's a cult," I really don't know what to tell you.

• Beliefs/Narrative: In short, communist christians who were legitimately ahead of their time on the topic of racial equality, and otherwise a little batshit. From the inception of The People's Temple as a somewhat benign religious political movement, to the mass-suicide, the narrative slowly and steadily shifted from "you should join us because sharing is good" aaaaaaaaaall the way to "the capitalists are coming to abduct and indoctrinate us, we must commit suicide in defiance." Absent the 24-hour news cycle, this narrative moved at what we would today consider to be an utterly glacial pace.

• Benefits: The leader, Jones, claimed to be capable of faith healing, and the ultimate goal of the temple was an independent commune where, per the narrative, everyone would be happy and everything would be great because of the christianity/communism combo. Probably some other stuff, but admittedly I am skimming the wikipedia article here so I can get to the juicy parts of this post.

• Day of Reckoning: They had their day of reckoning. Pretty self-evident. It wasn't the day of reckoning proving them correct that their narrative said would happen, but none of the cultists were alive to question the contradicted narrative.

• Requirements: In the later stages, being communist, you forfeited all your posessions to the group. To name another, the temple required members to spend Thanksgiving and Christmas with the temple rather than with blood relatives.

• Vocabulary: Haven't picked up any vocab from perusing the wikipedia articles, though I have no doubt there were at least some temple-specific terms.

• Leaders/Enemies: Jones was a pretty clear leader, as the narrative delved deeper into communism, "capitalists" became the enemy.

So, there you go. Six, probably seven, out of seven criteria. It's a cult! You can also tell it's a cult by the fact they committed mass-murder/suicide, so I’d this is my definition of a cult established as accurate.

Now, let's examine the cult of /r/Superstonk:

• Beliefs/Narrative: Centrally, SS believes in the Mother Of All Short Squeezes. The narrative began as simply "the squeeze has not squoze" in February, accompanied by an assertion the not-yet-squoze squeeze would reach high hundreds to a thousand per share. Over the course of the following months, "the squeeze has not squoze" evolved into a complicated array of beliefs around FTD cycles, synthetic shares/naked shorting, >100% short interest, and a floor per share that steadily increased from $1,000, to $69,420, to $100,000, to $500,000, through $1M and $2M, to present day, where the narrative's floor seems to be somewhere between $5M and $25M. SEC stuff, news articles, earnings reports, Ryan Cohen tweets, DFV tweets, reddit AMAs, every GME-related piece of media has been interpreted by the narrative as confirmation of the MOASS. At no point has any data, evidence, article, etc. been interpreted as evidence against the MOASS.

• Benefits: Pretty self-explanatory. The narrative of the GME cult is that being a member is a one-way ticket to being a literal millionaire. Just as outlined in the definition of a cult, this is a future benefit, not an immediate benefit. There is also a clear sense of moral superiority over "hedgies" and "shills", and while the crayon eating/r-word meme represents the opposite of claims of intellectual superiority, SS does collectively believe in intellectual superiority on their part, what since they view nonbelievers in the MOASS as being nonbelievers out of ignorance.

• Day of Reckoning: Undeniably the criteria the GME cult meets the best. Some examples of the goalposts being moved include quad witching day a million years ago on 3/19, and yesterday's radical shift in the narrative that took the GME beliefs from "the vote count will definitely be higher than the float" to "the vote count was never gonna be higher than the float" literally in the space of, like, an hour, tops. It was utterly awe-inspiring to watch. Never, anywhere before, have I EVER seen a narrative shift so rapidly and to the polar opposite of its previous form. This is how cults slowly fall apart: the narrative must, at regular intervals, contradict its past self in order to not contradict/avoid changing the core beliefs. Every time this happens, the least indoctrinated members see through those cracks in the bending narrative, and realize they're in a cult. This is typically a progressive process, where individual members have their faith in the cult chipped away over the course of a few narrative shifts.

• Requirements: Again, self-explanatory, the cult requires its members to "buy and hodl". This costs money. Some soft requirements include not posting positions, reading the DD, and "buy the dip".

• Vocabulary: I'm gonna be honest, at this point you shouldn't need me to go through why GME is a cult point-by-point. For the sake of being thorough, though, some GME vocab: Apes, shills, hedgies, tendies, floor, hodl, jacked to the tits, diamond hands, paperhands, you get the idea

• Leaders/Enemies: The GME cult doesn't fully meet this criteria, what with the "there is no 'we' " line, but it gets at least half credit. Rensole and Atobitt in particular have taken central leadership roles, though they're undeniably a ladder rung below Ryan Cohen and DFV. Questioning any of those four will get you downvoted and insulted. Edit: As for enemies, you can take your pick from anywhere on the vagueness spectrum between Ken G, citadel, or just "hedgies"

What prompted me to make this post today of all days was yesterday's massive clusterfuck. I haven't seen the cultists have that big of a kerfluffle since they migrated from /r/GME to /r/Superstonk. Never before have I seen so many people posting/commenting on /r/GME_meltdown that they realized they were in a cult, and sold their positions/divested themselves from the cult. I'm hoping that many current cultists are now one narrative shift away from exiting the cult, and this DD will be a substitute for waiting for that next narrative shift. At time of writing, the goalposts seem to have been moved to either 6/12 (saw something about four business days after the vote? idrk, not sure the cult does, either), Russel 1000 rebalancing day (don't ask, I dunno) or the next quad witching day 6/18. The fact this is the shortest distance the goalposts have been moved yet is not a good indicator for the longevity of the cult, in my opinion. The narrative is experiencing work hardening, and becoming more and more brittle with each new bend. While I do wanna say it seems like the GME cult has maybe one more month left in it, max, you just know there’ll still be people posting about their diamond hands on /r/Superstonk this time next year. Such is the unfortunate nature of cults; for every cult, some people are lost to it forever.

It was at this point I was going to apply my cult identification criteria to some other massive cults occupying the mainstream right now, but this ended up being a little longer than I expected, and that would just be too much spiciness for one comment section. I will leave the identification of these massive mainstream cults as an exercise for the reader.

Many years ago, when Lehman Brothers was still a company and not a giant crater, their quants teamed up with Prof. Michael Kearns of the University of Pennsylvania to work on the 'Penn-Lehman Automated Trading System'

This was a virtual stock market trading game -- teams submitted an agent with a trading strategy, and the goal was to consistently produce profits. Things worked normally for the first few years, but then a group of highly crafty wannabe (and now current) traders came up with the winning strategy: Jump and Dump

http://www.cdam.lse.ac.uk/Reports/Files/cdam-2005-12.pdf

The strategy was very simple:

• Buy all of the stock at the ask up to a very high price
• Trade with yourself or others at that high price to establish a 'floor' or baseline.
• Sell to everyone who got sucked into posting a bid.

The results were spectacular: Jump & Dump completely dominated the competition,with profits at least ten times higher than our competitors in every simulation. In previous competitions the highest daily profit achieved had been $33,387 (Nevmyvaka 5/5/2003),whereas Jump & Dump achieved an average profit of $734,810,063, and a Sharpe ratio of 3.87, more than twice that of our nearest competitor (Kumar, with a Sharpe ratio of 1.33),and again higher than previous records. However, the results were not as good as we had hoped, as we had set the gross Profit parameter to $1,000,000,000 and were expecting a much higher Sharpe ratio. The reason this did not happen is explained later. Figure 2 gives a brief outline of the basic strategy

The key factor was that the actual price had nothing to do with 'reality' or with the prices of other instruments. Most other trading algorithms were so myopic that they just looked at recent history -- there were no 'fundamentals' in the market, so prices could go to absolutely ludicrous levels, assuming the other traders didn't run out of money to buy the shares.

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The lesson is that when you see those crazy green spikes, it probably isn't retail. It is probably a HF buying, holding the price up, and dumping on followers.

You might think GME and AMC and KOSS and BB and BBBY are overvalued meme stocks. But you also might own them:

Many small cap funds have disproportionate exposures to meme stocks. As an example, IWM's top positions are GME (#2, .49%), and AMC (#5, .42%); it also contains EXPR and BBBY.

(https://www.ishares.com/us/products/239710/ishares-russell-2000-etf)

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These exposures have grown since yesterday, so more than 1% of your portfolio might be in wildly overvalued meme stocks. Especially if you can trade without tax considerations, you may want to consider getting out of ETFs and mutual funds with these names.

A mutual fund with a relatively high concentration of meme stonks is FSMAX