You can’t really go anywhere on the internet right now without hearing about what’s going on in the stock market with GameStop and any number of other short shares, but I’m well aware from scrolling down my timeline that a lot of people literally have no idea what’s going on or how it works or anything about it.
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I posted a fairly simple explanation of it in a post like this yesterday, but I later came across this thread which has explained it in by far and away the clearest way that I’ve seen so far. Figured it was my duty here on Sick Chirpse to share it with you guys so you can get a grip on what’s going on right now – this first sequence is just describing the situation up until the end of Wednesday:
This is a once in a lifetime historical event. It’s insane.
At least 1 hedgefund has gone bankrupt, thanks to a group of average joes on Reddit. By the end of the week, there will be a line of bankruptcies.
So let’s start at the beginning: pic.twitter.com/c3ZA2it9Iq
— Aaron D. (@MrBrownEyes2020) January 27, 2021
So for example:
Tim borrows Bob’s shares in GME, and sell them for $10, he pays Bob $1 to do this, and promises to give all of Bob’s shares back.
Then, if the stock goes down to $5, Tim buys the shares back at a cheaper price.
So Tim’s profit is $10-$5-$1 = $4 profit.
— Aaron D. (@MrBrownEyes2020) January 27, 2021
So they shorted Gamestop (GME) from $20, to $10, to $4. Their greed kept compounding. They kept doing it again, and again, for months. Making billions of dollars, and almost bankrupting this company. (shares and share price are used as collateral for loans and access to capital).
— Aaron D. (@MrBrownEyes2020) January 27, 2021
Enter Wallstreetbets- A trading/investing subreddit.
Someone noted that these hedgefunds shorted 140% of all shares available.These hedgefunds were so damn greedy, they borrowed more shares than actually existed. That’s how arrogant and dumb they were. pic.twitter.com/MpsFwMdqdM
— Aaron D. (@MrBrownEyes2020) January 27, 2021
And so we reach our main story of how the hedgefund’s greed ruined them.
Realizing that these hedgefunds shorted GME by a ridiculous amount, these Redditors (normal people like you and me), bought every share they could get their hands on. Driving the price up like crazy. pic.twitter.com/ojvdEZhNXb
— Aaron D. (@MrBrownEyes2020) January 27, 2021
So for example, if they borrow 10 million shares, and sold them for $10. They made $100 million in immediate profit. But eventually, they HAD TO buy those million shares back. They didn’t have a choice. That was the deal they made when they borrowed the shares.
— Aaron D. (@MrBrownEyes2020) January 27, 2021
So eventually, the due date for when these hedgefunds need to return the borrowed shares comes closer.
And what do they do?
They double down.
They short MORE. Because they’re sure that they can manipulate the stock enough to get it to crash, thereby saving themselves. pic.twitter.com/xIi5iwpV4h
— Aaron D. (@MrBrownEyes2020) January 27, 2021
Eventually Melvin Capital- a multi billion dollar hedge fund, needs a bailout, because it has lost so much money shorting GME. They borrowed billions off another hedgefund.
That was Monday. The stock price was $76.
— Aaron D. (@MrBrownEyes2020) January 27, 2021
So now Hedgefunds are crying on literally every platform they can get their hands on. They want the government to stop trading. They want this reddit forum investigated and banned. They’re screaming ”market manipulation”, when in reality these hedgefunds….. pic.twitter.com/AZDhJquY5N
— Aaron D. (@MrBrownEyes2020) January 27, 2021
Enter the ”whales”- individual investors who can make a splash and impact the stock. Millionaires and billionaires that have a bone to pick with hedgefunds and short sellers.
(whether you like these people or not is irrelevant, they’re part of this story regardless)
— Aaron D. (@MrBrownEyes2020) January 27, 2021
But these investors don’t care. They don’t care how expensive they buy the stock for. Because they KNOW these hedgefunds MUST buy the shares back.
For many of them, they don’t actually care if they lose money. They just want to watch these hedgefunds burn. pic.twitter.com/AOXYjf1hWp
— Aaron D. (@MrBrownEyes2020) January 27, 2021
So what happens next?
No one actually knows.
As time goes on, and as hedgefunds fight to buy back as many shares as possible (driving up the prices more on each other), their bill will eventually be due, and they will have to return the borrowed shares.
— Aaron D. (@MrBrownEyes2020) January 27, 2021
There’s a lot of upside to buying GME, but there’s also a crazy amount of downside.
Tomorrow the share could go back to $4 and you could lose everything.
These shares are obscenely overvalued, and the only reason they keep going up is……
— Aaron D. (@MrBrownEyes2020) January 27, 2021
#GME #GameStop #FuckTheHedgeFunds
— Aaron D. (@MrBrownEyes2020) January 27, 2021
That’s slightly clear right? Aaron did a good job, and thankfully he continued his thoughts on what was going on yesterday as well, as the Robin Hood app banned the little guy from trading GameSpot stock on its platform.
Here’s his take on what’s been going on today:
As I write this, the price has crash from $400, to $125 in
10 minutes. Now millions of ordinary people have lost out all their money.This was literally a crime, performed in broad daylight.
Because they know no one is gonna touch them.Man, Im fucking disgusted.
— Aaron D. (@MrBrownEyes2020) January 28, 2021
Guys.
Im fucking furious.The absolute fucking balls on these fuckers, to do this so openly.
I expected some shady backroom deal to fuck the average person. But to do this in the middle of wallstreet for the world to see is a level of arrogance that kings don’t even have. https://t.co/23dEdZvblP
— Aaron D. (@MrBrownEyes2020) January 28, 2021
Wow. I kinda got that this was a massive deal already and completely unethical from browsing around Twitter today, but the way this guy is talking about it really does hammer home how crazy the last couple days have been and how they’re probably only going to get even crazier tomorrow. Stay tuned – or just follow Aaron as he seems to know what he’s talking about.
For more of the same, check out this Redditor’s open letter to the hedge funds. He’s never going to back down basically.
