Wall Street lives an earthquake with epicenter in companies like GameStop, AMC or BlackBerry, Experts were betting on the stock market crash but they have become the obsession with an army of coordinated investors on the Reddit digital forum, From where they encourage to shoot their valuation shaking to the great mutual funds, that go way of losing more than $ 5 billion.
“Wall Street Betting”, 1 Reddit sub-forum that describes itself as a “4chan crossed with a Bloomberg terminal” has been boiling for several days with hundreds of thousands of users encouraging each other to buy shares frantically under the slogan “YOLO“(Only lived once) and thus overthrowing the speculative operations of the “hedge funds”, That this Wednesday they gave in before the creators of the call “Gamestonk“.
“We are very fucked up,” the official fund of the mutual fund tweeted without hesitation this Wednesday. Melvin Capital, One of the most exposed funds in the short options of GameStop, and that announced which have covered these speculative transactions following losses incurred in recent days by retailers.
“During 2020, many hedge funds have taken advantage of their capacity as an institutional entity to position ‘short’ with large volumes of capital,” he explains to EFE XTB analyst Darío García on this type of speculative operation in the focus of the controversy, which seeks to make a profit with the loss of value of securities.
“Wall Street Bets” and its nearly three million users realized how many “shorts” Melvin Capital had in companies like GameStop or the AMC movie chain, and by virtue of buying their shares and raising their value stratospherically they have “tried to overthrow” these operations.
“Very clever fools”
Although a string of market experts has come out during the week to criticize the inexperienced investors who have caused these unexpected tremors on Wall Street, the “redditors“They knew full well that they were provoking a call”short squeeze“, A multiplier effect to his trolley strategy.
An unexpected rise in the price of a stock, such as the one they caused, forces investors in the short options market to reduce losses by acquiring the securities of these damaged options, thereby purchases further drive the value of securities without any market basis for it.
GameStop rubbed off this Wednesday $ 380 per share when a week ago it was worth about 37, while AMC reached $ 20 when five sessions ago it stood at 3, leading a volatile list that also includes phone manufacturers BlackBerry i Nokia, Or retail stores Bed Bath & Beyond and Express.
“It seems like (investor) retailers are rebelling against large hedge funds“They take advantage of their size and legal capacity to position themselves short, to put them against the ropes,” said Garcia.
“I don’t think so none of them are necessarily a sign of a bubble, But of the power of social media and the ease of retail trading, ”added OANDA analyst Craig Erlam.
“The revenge of the losers”
Harangering the investment mass have been very active business figures on social media such as the controversial founder of Tesla, Elon Musk, Or the well-known businessman Chamath Palihapitiya, The latter revealing today that he had bought GameStop options and donated the money raised, about $ 500,000.
In an interview with the network CNBC, Palihapitiya said he had spent hours reading the forum and offered his conclusion that the phenomenon is an “elbow to the establishment” by young people who in the 2008 financial crisis saw Wall Street take too many risks and be “rescued,” while their families lost homes and jobs.
the investor Michael Burry, On which the film was based on this era “The Big Short” and the investment fund Scion Capital has taken advantage of the rise of GameStop, said on Tuesday in a deleted tweet in a matter of minutes that there should be “legal and regulatory repercussions” and that the movement is “unnatural, crazy and dangerous.”
In this regard, White House spokeswoman Jen Psaki said Wednesday that the Secretary of the Treasury, Janet Yellen “He is monitoring the situation” but the issue “is a good reminder that the stock market is not the only measure of economic health” and “does not reflect how it is going for working and middle class families”.
Brokerage platforms with zero commissions in the US such as TD Ameritrade decided this Wednesday to restrict certain transactions with GameStop and AMC to “mitigate the risk” of their clients, while in Robin Hood, Another of the most used, the securities enjoyed trading volumes well above what was usual weeks ago.
However, after the boom, it is this app that has banned people from investing short in companies. And it is users who have begun to massively rate them with a five-star rating.
Oanda analyst Ed Moya has opined that “a new wave of retailers has triumphed against the short-selling giants Citron and Melvin Capital,” while the Reddit rebels have claimed victory. pushing, in addition, to companies to which they have a special inclination, like the store of videojuegos GameStop, that the great luminaries of the Wall Street gave by death.
“We are seeing the pure essence of market democratization: hedge funds have the freedom to do what they do and retailers total freedom to do what they are doing. It is a war of economic capacity or power: in this case the retailers have won the battle of many Davids against Goliath“Garcia said.
With information from EFE
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