Wall Street Bets, GameStop, $GME, Melvin Capital, Citron, u/DeepFuckingValue, Stonks

A thread on what is going on

Since $GME stock started rising a few people have asked me what's going on, especially after tweeting this: https://twitter.com/yemi_uc/status/1352935755719602182?s=20

First of all. You need to know the difference between stock and stonks.

Stocks: They go up and down

Stonks: They only go up. $TSLA is stonk

Obviously, stonks are memes. But when 19-year olds and people with little financial knowledge are making bank on stonks you pay attention

To elaborate. This couple invest in stonks.

I totally recommend you follow @TikTokInvestors @wallstmemes and @ParikPatelCFA for some good laugh on investing and wall street memes.

Now, to GameStop.

Gamestop is a games merchant with lots of stores. Think Blockbuster but for games.

Before CoronaVirus, they had been posting huge losses and the virus dealt them a huge blow.

Some activist investors and retail investors got interested in the company in 2020

Wall Street Bets, a subreddit with 2.8M members had been talking about $GME since Q4, 2020. At least that's when I started seeing the Gamestop memes on Twitter.

The subreddit: https://www.reddit.com/r/wallstreetbets/

Enter Ryan Cohen, Chewy co-founder, who parked all his money in $APPL shares after exiting his company.

And Michael Burry, the famous Big Short investor, that predicted the housing market crash.

Both have been going long on Gamestop with activist reforms for the company.

Enter Shorts.

When a company looks like they've bad fundamentals, shorts apply downward pressure on the stock.

Shorts work by:
borrowing shares from a brokerage to sell
wait for the stock price to crash.
buy the stock back at a reduced price
Then profit

Shorts sound like a good idea in real life because you don't need to invest any money, but a very bad idea when the stock appreciates because of something called a margin call.

Margin means you've to have some money deposited with the broker to buy shorts.

So if a stock appreciates, the investor must either close their short and buy the share back at a high price declaring a loss.

Or they've to increase their deposits with the broker since they borrowed the share and they've not yet returned it.

Plus fees on Shorts are expensive.

So when Redditors on WSB began to pump $GME based on news of Micheal Burry and Ryan Cohen trying to straighten up the company, there was a stock rally which was fuelled by:

retail investors buying $GME
and hedge funds trying to cover their shorts buying back $GME

Hedge Funds have lost $5B since $GME began its rally back in 2020.

And Melvin Capital which decided to double down on their short instead of covering it is now declaring bankruptcy. https://twitter.com/WSBConsensus/status/1354233408835219461

It got more amusing when @chamath and @elonmusk piled in on GameStonk.

And then we learned u/deepFuckingValue's $50K position in $GME back in 2019 (he has been long for a while) is now worth ~$21M and he has not cashed out. https://twitter.com/TurnerNovak/status/1354287701109911552?s=20

What's the point of this? TBH, I don't know. But what is happening is historic.

It's literally retail investors that know nothing about finance against Wall Street firms.

This is the perfect summary for stock investing in Q1, 2021

If you want to get in on the action, start looking at AMC stock.

It's heavily shorted and WSB loves heavily shorted stock.

None of this is financial advice, so if you lose money. Sorry.