To help me study and relate Ethics to real life situation. Is what is happening with Gamestop in recent news a good example of
Standard of Professional Conduct #2 : Integrity of Capital Markets > Market Manipulation?
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Simply a case of irrational exuberance!
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Mark Meldrum has a good video on this that he uploaded on YouTube recently, but basically what has happened is that a lot of these companies had very high levels of short selling in comparison to their market cap. If the price suddenly rose rapidly, the short sellers would have to cover their losses and buy the stock, sending the price even higher. Well that’s exactly what happened - a bunch of retail traders bought call options, which forced the brokerages to buy the stock to cover if the call options were ever exercised. Prices got pushed up and then the trade went mainstream on media and everyone and their mama is doing it…looks like the trade is going bust now though, since Robinhood and other brokerages have restricted buying the stocks on their platforms. Down 60% already and it probably won’t stop until it hits 20-30.
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The restrictions are disgusting. It’s as if they are allowing these hedge funds short sellers to cover. I’m really surprised they allowed this behavior. Didn’t think this type of corruption could happen in the us. The short sellers must have a lot of influence.
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The bigger problem is securities lending. Most retail accounts that redditors use don’t allow for securities lending. Shares go from those that will lend to hedge fund shorts, to those that won’t. and that causes a massive squeeze where the hedge funds that are short, can’t find the shares to lend. this explains it pretty well.
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Really I was under the impression that the majority are levered. Either way they do the gamma squeeze via call options as well, and I’m sure the counter party who purchases the shares to offset the call premium are willing lenders of that stock.
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It’s a short squeeze. Some idiots shorted more stock than the free float. Some folks spotted it and rallied a squeeze on reddit, it’s not manipulation it’s more like catching someone trying to take more cookies out of the cookie jar than exist, and closing the jar on their hand. Trading against a trader catching their mistake and making them pay. The price is increasing in large part because funds are trying to buy stock to cover their shorts. But they shorted more than the float so it’s a super squeeze for GME.
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“I woke up. Why don’t you?”
Dillon (Carl Weathers) to Dutch (Arnold Schwarzenegger)
-Predator,1987
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terd is that you?
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its interesting how it’ll all play out.
no idea why gamestop just wont issue out equity at this point. they’ll help the shorts cover, and have a ■■■■■■■ of cash to at least give them true value with better prospects. they could literally do an equity raise of 5b, and there would be demand for it, given the shorts. and they can just become a holding company.
otherwise, if the price continues to go up, the short sellers will ahve to put up more capital. if short sellers cant and go bust. then the brokerages are on the hook.
anyways there is a lesson here: never short more than float. hopefully regulators take notice so this ■■■■ doesnt happen again.
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I don’t give a jack*** about how GameStop could potentially make a kill. Who allowed the over the moon Hedge Funds to go merrily for short … naked?
Why the regulator(s) should not be hauled up when people can short more than what is available in the market ??
Some questions will never be answered. It is not as if a case in isolation. The havoc it can wreck is unimaginable. But why ?
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Agree
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