GameStop share: Fight reaches a new level: suspected cheating trades

GameStop Fight Reaches New Level: Suspected Cheating Trades

The battle between private investors and Wall Street for GameStop shares is reaching new heights. The media and commercial platforms are positioning themselves as new parties in conflict. And it is suspected that the favorite of all amateur traders is playing badly. But first things first.

April 2020

The war begins when the financially strong hedge fund Melvin Capital Management of New York bets a huge sum in April 2020 that the video game chain GameStop is doomed. A little later Citron Research joins this position. The financial instrument for this is called “short”. GameStop shares are still worth three dollars.

This short position draws discontent from some private investors on the Wallstreetbets investment forum on Reddit. Wallstreetbets are known for their foul language and unconventional approach to dealing with values. Both gains and losses are celebrated. Forum participants call themselves degenerates, but keep the motto “we love this / this stock.”

Some participants deliberately pretend to represent the little man or woman who suffers from bankruptcy while Wall Street makes money from it. Shorts are anathema to them, as are New York’s money elite. Her preferred business app is named accordingly: Robinhood.

July 2020

The forms of resistance and the private investors of Wallstreetbets buy options and shares of the former video game giant, so many of the investors of Generation X have nostalgic feelings, sometimes risking big losses. There was finally pressure on the boiler when Citron Research described private investors on Twitter as idiots.

Until the end of 2020

Solidarity among private investors is increasing and, with it, the price. While this was just under $ 3 in April, it is now nearly $ 20.

A few days before

The price is skyrocketing. Citron Research has to sell its positions at heavy losses. According to the company, the buyback price averaged $ 90. Melvin Capital gets that too. New Yorkers need a rescue package worth $ 2.75 billion to stay out of trouble. Both companies claim that they no longer have open short positions. Important in this context: Melvin receives the rescue package from two other hedge funds. One of them is called Citadel LLC. A name to remember.

January 27, 2021

Meanwhile, the number of Wallstreetbets members has doubled from two to more than four million. On CNBC, the leading commercial television network in the US, Wall Street experts are calling for an investigation and are trying to classify the previously ridiculed phenomenon of Wall Street gambling. Surely it can’t be that the bored unemployed and students are looking for a hedge fund with an orchestrated operation. We are talking about manipulation of the stock market by the internet community.

The renowned “Wall Street Journal” is also trying to find a label for the millions of Wall Street gamblers. They are mainly old rightists. Anyone who has been visiting the forum for a long time knows two things above all: the etiquette approach does not work with such a diverse group and politics is rarely if ever discussed.

Meanwhile, the Wallstreetbetters are getting prominent supporters: Elon Musk is helping. Several billionaires (Mark Cuban, Chamath Palihapitiya) are also on the side of private investors.

A few hours after the “Wall Street Journal” published the right-wing extremist indictment, he returned with a public correction.

On Wallstreetbets, some users want to have determined based on trading volume that Melvin has not yet closed his short positions. Users are being asked to further strengthen the share price, which has now reached $ 340.

Thursday, January 28, 2021

GameStop’s price increases in phases by an additional 50% to almost $ 500. Robinhood trading platform announces that it will not offer any options for GameStop (GME). One must buy the real shares. When the stock market opens to private traders, the outcry is great. Liebkind Robinhood has also blocked the purchase of the stock. However, positions that are already open can be closed. This means that the price of the stock can almost only go down.

Other trading platforms are also doing the same. EToro, popular in Europe, is struggling to cope with the crowd at first. After that, trading with GameStop will end completely. GME holders will subsequently have the opportunity to resign their position, but will no longer be able to buy. Several online retailers around the world are proceeding in a similar fashion. Later it reaches other Wall Street favorites bedridden with restraints: Nokia, Black Berry, Bed Bath & Beyond, Naked, Koss, AMC …

All hell is happening on Wallstreetbets. Robinhood’s Wikipedia entry is briefly tampered with and the app is bombarded with 1-star ratings in stores. Politics intervenes. Congresswoman Rashida Tlaib (Dem, Michigan) requested a hearing from the United States House Committee on Financial Services on Twitter. Suspicion of market manipulation.

The accusation of manipulation is further supported. Clever bettors on Wall Street have found that more than half of Robinhood’s orders are processed through Citadel’s high-frequency trading system.

As a reminder, Citadel helped Melvin Capital with a cash injection and is now a minority owner. Citadel LLC is said to have shorted a price drop shortly before GME’s buying opportunities came to a halt, says investor and legal specialist Justin Kan.

A lawsuit is being filed against Robinhood in the Southern District of New York. Because the need is so great, it becomes a class action lawsuit.

Noted Wallstreetbets user “DeepFuckingValue” posts a picture of his daily loss with gambling stop positions: $ 14.8 million. The forum celebrates him like a king.

To be continue.