A group of small investors on Reddit are outsmarting the titans on Wall Street and it has them in a panic. Wall Street is literally “losing its mind” over these investors doing what hedge fund managers normally do by trading accounts ranging from $500 to $2,500. These are borrowed stocks and the intent is to take “down the billionaires,” Fox Business host Charles Payne told Tucker Carlson on Wednesday.
Payne was very animated when it came to the dramatic surge in GameStop’s stock price after this band of social media investors bought up the struggling retailer’s call options. That pushed the company’s stock prices into the stratosphere and crushed short-sellers in the process.
The hedge fund managers actually borrowed more shares than what actually existed to short-sell them and now it’s taking them under.
“These hedge funds selling this stock, they don’t own the stock, so they borrow it,” Payne said. “Imagine you borrow a stock that’s trading at $10 and then you drive the share price down and then you buy it back for a dollar. You make the difference, nine bucks.” And that is exactly what these crafty investors are doing. They have turned the tables on the game in the stock market and people love it.
Payne went on to clarify what a short-seller is. They are investors who speculate the price of a stock or security will fall in value. They borrow shares and then sell them with the intent of buying them back at a lower price.
“They are allowed to short so much stock,” he stated. ” Do you know the amount of stock that was out on GameStop? Let’s just say 100% of the shares that are out, they shorted 140% of the stocks, so they borrowed the same stock over and over, and over, the same shares and sold it into the market.
“Their job, their mission was to drive GameStop to zero,” Payne told Carlson. “No one said a word on any financial network, particularly CNBC, which always lets the shorts come on …”
These small investors revolted against the titans of Wall Street and came up with a brilliant plan to drive GameStop’s stock price up. They circumvented the rules just like the big boys do and got wealthy in the process.
Somebody is going to have to explain why a public Reddit thread calling for individual investors to buy a stock is not ok
But billion dollar hedge funds appearing on financial tv anytime they want to pump whatever stock they want is totally fine
— Buck Sexton (@BuckSexton) January 28, 2021
“It’s called a short squeeze,” Payne explained, “and it’s working.”
“Wall Street is losing its mind and Wall Street now wants to change the rules of the game because a bunch of people with accounts ranging from $500 to $2,500 are taking down the billionaires.”
And it caused Wall Street hedge funds to run to the exchanges to halt trading so they could prevent further massive losses.
REMINDER: Wall Street hedge funds running to the exchanges to halt trading to prevent losses is another example of why the game has always been rigged in favor of the elites.
When you lose it is okay, but when they lose the game is turned off.
— Pomp 🌪 (@APompliano) January 27, 2021
The media labeled it a ‘Ponzi scheme’ but what these investors did is not illegal. Not yet anyway. The so-called experts say the run can’t last.
GameStop’s stock has shot up 10,400% during this maneuver. It’s simply stunning to watch. Wall Street investors who bet against the company’s future stand to lose billions of dollars over this.
Even Elon Musk got in on the fun by tweeting to his 43 million followers the link pointing to the Reddit community investing in GameStop, called r/WallStreetBets.
Gamestonk!! https://t.co/RZtkDzAewJ
— Elon Musk (@elonmusk) January 26, 2021
The stock closed up 92.7% on Tuesday. By the close of trading Wednesday afternoon, the stock was $347.51 per share, which was up from historic lows of approximately $3.30 per share in the summer of 2019. In after-hours trading, it dropped more than 37% and then rose again.
“We’re seeing a phenomenon that I have never seen,” Jim Cramer, a Wall Street commentator on CNBC and a former hedge fund manager, said on Monday. And GameStop may be just the beginning. “It’s insane.”
Traffic to the Reddit community behind all this, WallStreetBets, is smashing records. WallStreetBets counted 73 million page views for its discussion boards on Tuesday.
BREAKING: Melvin Capital closes out of its GameStop position $GME@andrewrsorkin reports: pic.twitter.com/5dx65M7zIP
— Squawk Box (@SquawkCNBC) January 27, 2021
“This is unnatural, insane and dangerous,” said Michael Burry, who is a major GameStop investor and one of the subjects of the book and movie The Big Short, in a now-deleted tweet. His roughly $17 million investment in the company has exploded to $250 million as of Tuesday.
There is no way of telling when the frenzy will stop or what will happen here, but this is historic. It will eventually die down but in the process, Wall Street is being upended. And the crowd roared its approval.
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