The amount of pumping behind GME is unbelievable. On of the top comments as of right now justifies burning a year's worth of income, just to stick it to Wall Street.
The thing is, I don't think anyone at Wall Street is touching this stock right now. The stock price is far too high for a buy grounded in fundamentals, and shorting this particular stock right now can backfire catastrophically, as we have seen.
This has the veneer of a crowd sticking it to someone they felt exploited by, but in the end, they're just being exploited by someone else.
Right now, the only ones benefiting from someone sticking a year's worth of incoming into GME are those doing the pumping.
No matter how much people buy, they can't buy >100% of the shares on the market unless GameStop issues new shares. The people buying are betting that when these hedge funds need to cover, they will be covering ~120% of the number of shares (the amount of shorted stock) on the market. That covers everyone that has shares right now.
So right now, its a tug of war (hence the volatility). Its a zero sum game where one side will definitely lose. You can argue that the company isn't worth anything and that buyers will get hurt, but only when <100% of the stock is shorted.
edit (below):
The loser will be the one holding 100% of the stock. At that point the stock would plummet because all the buyers have left. Meaning if the hedge fund loses, they are not just covering at a higher price (and thus continuing to drive it up even more), they will effectively be buying worthless stock.
I consider this a battle of trading strategies. The fundamental value of the company is beside the point. Hedge funds have done this to each other before, that's why there's an existing term for it - short squeeze. Its definitely covered in a textbook for first year business school students.
You are 100% right and that's what's going on.
However, the pump-and-dump kinda took a life of its own becuase GME is a perfect storm:
* it's a highly shorted stock, so the chance of a short squeeze is high
* there's a (misguided) wall street vs retail narrative going on
* GME is a name everyone knowns, especially the reddit crowd, so people are more willing to buy in
People are being duped into raging against the machine right until they lose their life savings, while u/deepfuckingvalue and friends are laughing all the way to the bank.
And when it will all collapse, everyone will point fingers at the rigged market, instead of realising they shouldn't have thought twice before jumping in this senseless buying.
You need to define your terms. You don't get charged and go to prison for "pump and dump", you get charged and go to prison for "securities fraud".
Right now, people are saying it's worth burning a lot of money just to stick it to Wall Street. As in, if you do this, you're probably gonna lose a lot of money, but you should do it anyway, because it's the right thing to do. (note: I'm not arguing the merits of this argument, I'm just stating what I interpret the argument to be.)
The thing that's illegal that will put you in prison for securities fraud is to claim that if you buy GME and hold it, you will make a lot of money. This isn't illegal because it's fucking over Wall Street, this is illegal because you're lying. The crime isn't "pump and dump", the crime is "securities fraud".
Also note that traditionally, in a pump and dump scheme, you buy first and pump later. People right now are buying and pumping at the same time. They're not (just) pumping by telling other people to buy the stock, they're pumping by buying the stock. This is a significant difference.
That being said, since Everything Everywhere Is Securities Fraud, I guess this is securities fraud too. (/s)
https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...
For the past week, a majority of “stick it to Wall St” comments have been saying (a) don’t buy it if you don’t like the stock, (b) only buy with money you don’t care if you get back, and (c) if you really really just want to stick it, then buy in order to take the share off the market not to make money, only buy a share or two then put them under your mattress.
Can’t speak for the top comment, but a majority of the advice has been in the “only spend a few dollars for entertainment and political value, and only spend if you never expect to get back”.
Some are being explicit, saying, think of your buy as a political contribution to Occupy Wall Street.
I'm wondering, at what level, this can become a self-fulfilling prophecy?
A lot of the talk has been that the stock price doesn't reflect the company's 'true value' (it's volatile and mostly inflated). But there are a few outcomes that truly increase the company's value. Obviously the brand/marketing aspect -- lots of free marketing. New key board placements show that they are potentially restructuring/refocusing and that potential strength is highlighted by the public messaging within WSB. (The messaging is obviously disproportionate and a reaction to negative valuations by the those that shorted it...but still influential.). It seems to be growing at about 1m+ per day. You have a lot of influencable eyes on content there.
What if GameStop gets essentially treated like a defacto co-op of sorts? What if WSB helps coordinated buys? What if it becomes the "preferred retailer" for purchasing/selling consoles? (Even going so far as recommending against purchasing from other retailers). What if it gets championed as some sort of anti-corporation corporation. What if WSB helps guide whatever transition is necessary at the retailer (e-sports? some sort of wework-gaming hybrid? Sustainable? who knows). The brick-and-mortar retail space is going to be very unpredictable in a post-pandemic world.... There could be a certain pride and self-interest in helping drive gamestop's business. A lot of the wit and intelligence gets overshadowed by outside reading of the memes. The mods over there are very smart and there's potential for something well-organized to come out of this.
We might look at how WSB affects Robinhood as a business as some kind of indicator of the massive power of such an organized group.
The company has the potential to become as valuable as the "inflated" valuation.
Hmmm. Why wouldn't the hedge funds that are not short GME jump all over this? That is probably why it has gone so high. The quant programs detect the momentum and ride it up. The funds can trade so fast that they will exit before any of the RH traders.
I too doubt this will end well for the people pouring money in at high prices but no one seems to have trouble with the legality of gambling so I don’t see how this is any different.
If Gamestop issues shares at these elevated prices and successfully uses this money to pay down debt and pivot it could end up a good long term investment.
I think the bigger question is “Is allowing market participants the ability to drive down the price of a share using leverage or no capital at all a good thing for the stock market and economy as a whole?”
Otherwise you're just using a term that fits your conclusion.