Institutional greed versus Boredom ( The r/Wallstreetbets story)

And now, i know many of you heard a lot these days about Gamestop, Wall Street and Wallstreetbets group. This issue is much deeper than it seems, and i will try to get on with it. Until recently (2019 i will say), only the corporations could afford investing into IPO before the market, and you really needed to be rich and well-known to be asked to invest into startups. Today, whether you talk about crypto (Paypal, Revolut, Coinbase) or shares (RobinHood), there are new entry points for the individual investor. I know they are not ideal, and they have a lot of fees, but once you are in you may learn more about it and become a smart(er) investor. Sometimes you can even put up a good fight. Because this is what this is about. Rich privilege. And now the door is open, and everybody can see that the emperor is naked. Everybody applauds right now, a victory of the average guy against the big corporation, a David versus Goliath epic fight. But this is not finished, and somebody will pay the price in the end. Most probably somebody who joined the party late.

Shall we dig deeper?

WSB (R/WALLSTREETBETS) is a subreddit channel where 3.5 million Reddit users were discussing trading ideas and strategies. Speculative ones, very risky ones, most of the times. One guy with the handle Player896 noticed that despite Ryan Cohen spending $76M for almost 13% of the Gamestop company stakes (R.Cohen is Chewy CEO and the largest individual shareholder in Apple Inc), and their numbers being quite good, given the economic environment, the company was being heavily shorted by a couple of institutional investors, and a narrative was provided to media that Gamestop will get bankrupt as everything is shifting from physical to digital in media. Covid19 also factored heavily into the equation. So we have Ryan Cohen and 2 other of his friends as investors on one side, trying to keep the ship floating, and some big institutions continuously short-selling GME shares to induce panic selling. Let me explain what short selling is. A big company or corporation will borrow some shares, wait to drop in value and the buy them back and pay the lend. The difference is their profit. If they do not drop, it is critical for them to buy the stocks and to pay the lend, driving the shares up even further. The villains in here were Melvin Capital and Citron Research, trying to make more money using other people misery, even if Gamestop was trying to survive. And then this happen. The Wallstreetbets group decided to make them pay for that. You know, many people that are into reddit, and crypto, and all that, were also avid gamers as children, or even later in life. For many of us Gamestop means funny, happy memories (remember waiting for midnight for your favorite game to launch?). They started to buy GME shares to drive the price up. What happened was beyond everybody expectations. Heck, even Elon Musk was tweeting ''Gamestonk!'' adding more fuel to the fire. In just 9 days, GME increased x18, from $19 to $382. The two mentioned market manipulators got manipulated, and their losses are estimated to be close to $5 B. Yeah, you may read it right, billions. The higher-ups decided is time to fight back.

And strange things started to happen. As WSB started to buy other big corporations shorts (Blackberry, AMC, Nokia, Bed Bath & Beyond), all of them increasing in double or triple digits, the mobile friendly apps RobinHood and Trading212 had some well timed outages. You may be familiar with this if you know about crypto, is that thing that happen every time with COINBASE when Bitcoin or Ethereum increase/decrease with more than 20-30%. No kidding. Even with all the money from the fees, RobinHood and Trading212 decided to go against their clients wishes and halt trading for the shares that they were thinking they are pumped to damage the big investors shorts. TD Ameritrade stopped all GME trading. In response to the WSB Reddit channel went private, with millions of new members joining every day, and the company called Discord where they had a chat hosted banned them unde some obvious flimsy pretextes (hateful posts). Trying to appease to the public, RobinHood said that their platform could not keep up with the increase in user numbers and they just raised another $1 B from their existing investors to deal with this. But this is still a PR disaster for them, and at least two lawsuits were filed, with some US senators declaring that this conduct is unacceptable. Winklevoss twins reminded the world that Melvin Capital and Citron almost bankrupted Tesla using the same strategies. Also, as you can see bellow, Winklevoss company Gemini is used for RobinHood crypto. Liar, liar...

Crypto to the rescue, FTX exchange added GME, with the option to buy it using crypto, and the exchange CEO, Sam Bankman Fried announced this in one of his tweets ''alright fine, why not.''Anthony Scaramucci, the Skybridge Capital executive was laughing asking Melvin&Citron 'how they are going to beat a decentralized crowd'.

Yours truly

George

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