![]() ![]() ![]() Cohen's past successes and don't know what he has in mind going forward, but I need to see their strategy before I give them credit for materially higher earnings power," Pachter says. Cohen, co-founder and former CEO of pet e-commerce site Chewy ( CHWY), has amassed a large stake in GameStop over the past six months via his RC Ventures firm and recently gained three seats on GME's board of directors. "GameStop has become a cult stock because of Ryan Cohen's success with Chewy," Wedbush Securities analyst Michael Pachter wrote in a note to clients. However, while WallStreetBets has claimed both money and victories, very little of this has so far led to meaningful support for the actual underlying company, GameStop. 27 that his Citron Research had covered the majority of its short position at a 100% loss, but it still maintains a small position. Well known short seller Andrew Left said Jan. Melvin Capital, one of GME's most prominent shorts, was forced to take a $2.75 billion bailout from a couple of other hedge funds. The subreddit's short-squeeze strategy has claimed at least one pelt so far. WSB realized that if they bought en masse, they could deal a blow to the "smart money" shorting GameStop stock. As the stock's price rises, the short seller's losses grow, and the broker requires ever more margin payments. When traders make short sales, their brokers demand a margin payment, which is taken from their accounts to offset potential losses. Regardless of what you paid for it, a stock's price can't fall below zero.īut when you short a stock and it rises, there is no limit to how high it can go. If you're long on a stock, the most you can lose is 100% of your investment. It exposes a trader to theoretically infinite losses. Make no mistake, short selling is loaded with risk. Note well that short selling is incompatible with the principles of long-term investing, which by definition doesn't rapidly churn positions and take on excessive risk. They buy the stock back to return to the lender – ideally, at a lower price than they sold.They then wait for the stock's price to fall.The short seller then sells those shares.A short seller borrows shares from a broker.Either way, frictionless trading enabled by new technology and fee-less trades helps the WallStreetBets community stick it to "the shorts." Others are no doubt just bored from being cooped up inside because of the pandemic. In others words, for some traders, Robinhood isn't just a cute brand name for a trading app – it's an ethos. Separating hedge funds from their money – the 99% against the 1% – by sticking up for shorted stocks such as GameStop is a stated goal. A number of WSB traders are openly motivated by a desire to profit at the expense of "The Man": the rich hedge funds and other institutional investors on the other side of the trade. What's striking in this case, however, is how many of them are trying to send a message. It's fair to assume that plenty of GME buyers are just looking to make a fast buck. "The massive short contributed more toward the meme stock." (A meme stock is essentially a cult stock.) WallStreetBets Wages War on the "Smart Money" "It was a meme stock that really blew up," a WallStreetBets moderator told Wired. At this very moment, WallStreetBets is working to ignite short squeezes in AMC Entertainment ( AMC), BlackBerry ( BB) and Nokia ( NOK), among others.īut nothing, so far, has taken off like GameStop. Lumber Liquidators ( LL) and Plug Power ( PLUG) have had price spikes in the past thanks to organized online buying. Once WallStreetBets alighted on GameStop, it was more like a pit bull with a pork chop.įor the record, this isn't the first time WSB has singled out a stock for crazy hype. To get a sense of its self-concept, WSB bills itself as "4chan with a Bloomberg terminal." ![]() The 21 Best ETFs to Buy for a Prosperous 2021Īs with the message boards of the 1990s tech boom, WSB is a place to swap trade ideas, juvenile jokes, threats and insults. ![]()
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