Brick-and-mortar video game and electronics retailer GameStop was indeed already struggling. What with the china virus lockdowns and popularity of streaming, who goes to a physical store to buy a game?
When Ryan Cohen -- founder of online pet food giant Chewy who held a 13 percent stake in GameStop -- was appointed to the company's board in January, many investors believed he'd be a corporate savior. GameStop’s stock surged more than 50 percent, going from $20.42 to $31.40 after reaching as high as $38.65.
Then a group of 'vulture' hedge fund managers at Melvin Capital and others tried to drive GameStop out of business quicker by 'financial' force, and enrich themselves doing so.
These greedy investors took out massive short positions against GameStop stock $GME. They swooped in and started borrowing the stock, selling it high, buying it back low, and pocketing the difference, minus the fees to borrow the stock.
As of Monday, 71.2 million shares of GameStop stock involved a short position, more than the total amount of publicly tradable shares, something that’s only possible because not all shares of $GME are available for purchase.
Apparently, a community of individual retail investors and activists online were also monitoring and buying $GME. Thousands on the r/WallStreetBet message board were buying. Word spread on social media and thousands more piled on, driving up the buying frenzy and consequently the price of $GME.
The hype around $GME quickly turned into online economic war between populists and vulture capitalists represented by Melvin Capital. Populists are determined to keep $GME high, and some were making millions doing it; while Melvin Capital and others having bet it will crash and burn, are losing millions.
“When these boomers made their bet, GME wasn’t a big thing on WSB yet,” one r/WallStreetBets poster wrote. “I don’t feel bad at all taking money from these rich greedy hedge fund managers.”
It has become a 'two-can-play-the-game' situation. Professional speculators like those at Melvin Capital were already playing the market like a casino. But in this round, the populists were winning -- individual investors are banding together to take advantage of Wall Street, just like the hedge funders.
The organic campaign to create artificial demand for GameStop stock successfully caused its price to rise more than 1,000% over one week, forcing short sellers to buy back into the stock to cover their potential losses.
This process, known as a short-squeeze, caused short sellers to lose an estimated $70.87 billion while the retail traders who bought into GameStop have seen the value of their shares increase dramatically.
Melvin Capital was down 15 percent for the year on Jan. 22, according to the Wall Street Journal, leading the fund to take a $2.75 billion rescue package from other rich investors. On that day alone, short sellers against GameStop lost $1.6 billion, financial analytics firm S3 Partners said.
Citron Research managing partner Andrew Left who has argued that $GME will fall to $20 per share, revealed that GameStop backers were sending pizzas to his house and signing him up for dating profiles. He learned his lesson and decided to stop bashing GameStop.
The r/WallStreetBets-inspired buying frenzy also got to other struggling stocks, leading to a surge in volume of shares of AMC Entertainment, Bed Bath & Beyond, Blackberry and Nokia.
By Wednesday, the vulture hedge funders had started to fight back in the most corrupt and authoritarian way -- changing the rules.
Platforms like Robinhood and Interactive Brokers started limiting trading on certain stocks including $GME. Discord temporarily banned the r/WallStreetBets servers.
News also resurfaced online that Citadel LLC through which Robinhood routes its trades, recently injected $2.75 Billion into Melvin Capital. And it was also revealed that Joe Biden’s Treasury Secretary Janet Yellen has made over $7 million from speaking at Wall Street firms including Citadel.
Outrage reached fever-pitch online Thursday as users and activists alike slammed Robinhood and others for manipulating the free market in their favor against the people.
Two Robinhood users filed separate lawsuits against the brokerage app Thursday. The first lawsuit filed in the Southern District Court of New York alleges that Robinhood "purposefully, willingly, and knowingly" restricted certain securities transactions, including GameStop. The other lawsuit filed in the Northern District Court of Illinois alleges that the app manipulated its platform.
"Robinhood’s mission is to 'democratize finance for all.' They have failed," Alexander Cabeceiras, an attorney for the Derek Smith Law Group representing plaintiff Brendan Nelson in the New York suit, said in a statement. "They have purposefully failed this mission and failed their clients in an attempt to—what appears to be—appease their investors and/or potential investors."
Robinhood co-founder Vlad Tenev denied any corrupt intent in a series of tweets. "To be clear, this decision was not made on the direction of any market maker we route to or other market participants," he wrote in part. "Starting tomorrow, we plan to allow limited buys of these securities. We’ll continue to monitor the situation and make adjustments as needed."
As the debate over market manipulation raged online Thursday, many pointed out that President Trump has been warning about a system rigged by globalist elites.
"If you figure out how to make a lot of money, and if you’re like Donald Trump and you figure out how to get elected, you figure out how to beat the Deep State, they’re gonna come and they’re gonna wipe you out," popular conservative radio host Rush Limbaugh said. "They’re gonna destroy you, and that’s what’s happening with GameStop."
A gabber noted the similarity between brokerage firms like Robinhood shuting down trading of $GME and corrupt Democrat election officials stopping the counting of votes on presidential election night last November.
"Call me crazy, but I bet the people that can shut down multiple Wallstreet stocks in the middle of a trading day are the same people that can shut down vote counting in the middle of the night," @TexasVet wrote on free speech social media network Gab.
Bitcoin maximalists took the opportunity to tout the importance of the decentralized monetary system. "Everyone is getting a quick education this week on why bitcoin is important," Gab CEO Andrew Torba wrote. "They can only control us if they control the money. When they no longer control the money they will no longer control us."
The GameStop saga is a developing story. Check back for updates ....