# GameStop

Discussion in 'Business & Economics' started by Saint, Jan 30, 2021.

1. ### SaintValued Senior Member

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4,180
I don't understand very much about what happened, I know that some Funds short sold the stock to drive down the stock price and caused the company's share to plunge.

So, now the coalition of grassroot buyers are able to fight back?

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3. ### SeattleValued Senior Member

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6,958
Forgetting the "perfect storm" aspect of this case, short selling doesn't drive a stocks price down any more than going long drives the price up. Generally speaking the fundamentals of the business controls whether the stock goes up or down.

It is possible to manipulate the stock price and that's generally illegal. If the stock is lightly traded or has few shares outstanding a fund with a lot of money could influence the price but most ways that you could do that are illegal.

Of course just buying stocks does tend to provide support for a stock and a lot of selling does lower that support but what is happening now (whether illegal or not) is manipulating the stock and isn't based on fundamentals.

They enter into a sugar futures contract to provide 5 tones of sugar over the next year. Sugar starts out at $100/ton but ends up at$200/ton. They make $100/ton. If sugar drops to$50/ton, they still have to pay $100/ton. Therefore they give up the possible opportunity to profit if sugar prices go down but are protected if sugar prices go up. Stability of price is more important to their business model. It's the same with forward contracts (currency). Boeing sells airplanes to Japan. They build in a certain profit margin. If the Japanese pay in Yen and the value of Yen goes up, Boeing would also profit just from the currency translation. If Yen goes down vis a vis the Dollar, Boeing would lose from the currency translation. They can eliminate that risk with a futures contract. Last edited by a moderator: Jan 31, 2021 18. ### James RJust this guy, you know?Staff Member Messages: 35,782 Thanks for your help, Sarkus. I guess I was confused because of the borrowing of the stock and having to re-purchase it at a later date. 19. ### SarkusHippomonstrosesquippedalo phobeValued Senior Member Messages: 8,989 I've read conflicting reports about the short interest on Gamestop, with some saying it is now c.50-80% - indicating that many shorters have closed their positions. If that is the case, those investing in GME now are possibly in for a rude awakening. The price dropped from USD 325 to 225 yesterday, and I suspect further drops to come. I also wouldn't be surprised if this actually leads to more shorting, and perhaps the hedge-funds who recently suffered losses can ultimately recoup their losses (and more) due to the very type of action that the Redditers are trying to upset. Will be interesting. sculptor likes this. 20. ### sculptorValued Senior Member Messages: 7,548 so far, today a low of$74.22---now 103(and climbing)

If i had a desire to gamble
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21. ### SarkusHippomonstrosesquippedalo phobeValued Senior Member

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8,989
Eek... hoefully the HODLers bought lower, but I suspect there are some worried people out there, even if individual losses might be low; do they cut losses now and hasten the decline, or wait to see if the price eventually increases, even if all indications are that it will drop back to the c.40 range it held prior to this activity.

AMC Entertainment, one of the other shares subejct to the squeeze, is following the same trend... yesterday's close was USD 13.30, bottomed at 6.30 or so, and currently 8.05... not faring quite so bad, but then I don't think it caught on to quite the same extent.

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