Does Gamestop have a future?

You can’t be killed by people shorting your company, unless you need to raise equity because you have no cashflow. If you have a healthy underlying business and don’t have excessive leverage, a short attack just makes it cheaper for you to buy your own shares.

No, but they saddled them with debt that was not theirs. Go back and read up on it. I do believe their demise was a catalyst for what’s happening now and has been explicitly mentioned on Reddit as this has been happening.

There are no more toy stores, but there was room for a specialty retailer of toys (and bikes, and video games, and baby goods), and their financials were ok before that debt was handed to them. One thing about buying toys online is you can’t touch it or get any idea of its quality without making the purchase. That sucks. Kids need that kind of thing too, and it made for excellent family time.

Anyway, Gamestop’s demise was also foretold long before its time. New console launches were massive for them, as anyone with a brain would have expected them to be.

Like I say, you’re conflating two completely different sets of people, the shorters, and the investors that took the company private with a leveraged buyout and saddled it with the debt. It was the latter that doomed the company (along with market trends and failing to move online), and the former that profited from predicting the doom but didn’t meaningfully precipitate it, except for making it more difficult for an equity raise to recapitalise the company.

OK, I understand what you’re saying, but I guess in this case there was a fear that the same thing was about to happen to Gamestop for really no good reason as they are doing very well and were right-sizing their number of stores.

But shorters make it easier for the investors to buy out the company, no?

Not sure I’d agree with “doing very well”, they’ve been lossmaking for years and have declining revenue. But probably not imminently going insolvent. What happened to Gamestop’s shares seems to have been aimed at squeezing shorters, rather than preventing an LBO, though it may have that effect if the price increase lasts (which I highly doubt).

In principle, yes. But with TRU the LBO preceded any significant short action.

No, the “market manipulation” has nothing to do with the ongoing viability of the company. What killed them was the debt loaded onto them by the hedge fund investors. It’s a common tactic - load the company with debt, pay dividends and management fees to the hedge fund. If the things go bad though, the company goes under and the hedge fund loses it’s investment. But the loss is less than what it could have been because the debtors now lose money that otherwise would have been equity.

Anyone understand enough to know if these claims are true?

What’s going on with Gamestop is insane. A major hedge fund likely loses hundreds of millions and has to find additional investor support because a bunch of gamer bros on reddit didn’t like them saying a bunch of negative things about Gamestop and shorting their stock, so the gamer bros bid up the stock to insane heights. But at some point the bubble is going to collapse and no one will win.

The two things aren’t contradictory. Not to mention the registered market-wide short interest is probably not up to date.

Much of the stockmarket is pure gambling nowadays and this Gamestop thing is just one example. Tesla is another, an insane stock price for a company that sells peanuts compared to its competitors.

who hedges the hedge funds?

The more hedge funds fail, the better off we are. They are parasites.

Can someone explain in plain English what is happening? I have no idea. For some reason the stock is going up and there are two competing groups. And they’re both the bad guys?

I read the Vox and am watching this video to understand

https://www.youtube.com/watch?v=2h7jfNpL4QA&feature=youtu.be&ab_channel=vonsek

I think some people put in a crapload of money in short positions that need to be repaid Friday (there’s disputed reports they excited partially/fully from that)

Which means there’s a lot of money to be picked up on the table if you call their bluff and keep pumping prices up.

Some hedge funds felt like gamestop is a failing business. They shorted the stock which just means that they paid someone who owned the stock a free to borrow it, then sold it. They need to return it at a certain point. They expected that when they return need to return it they could buy back shares at a cheaper price because gamestop is not a very good company. Since the price of the stock went up a lot then this was expensive for them so they will lose money and potentially lost a LOT of money.

Meanwhile, some people saw that gamestop had a lot of short interest and decided to buy a bunch of gamestop stock or options to buy stock. Then they banded together to convince the people who rioted to force McDonalds to bring back a high fructose corn syrup sauce that they saw in a cartoon that they should buy Gamestock stock. A lot of those people sold their bitcoins and bought gamestop stock so the price is going up a ton. They really leaned into the populist message that this will hurt the financial market instead of rearranging deck chairs.

Everyone who held the stock before the reddit sauce crowd arrived is hoovering all the sauce peoples’ and hedge fund people’s money into their pockets. The sauce people will lose all their money but will always have the reddit flair they made along the way. The hedge fund people will just keep investing in stuff but will have a bad Q1.

True, BUT. The hedge funds were using leverage to short the stock beyond the possible shares, and that comes with certain conditions, like getting called if the stock price moves too far. They are boned.

Oh, 100% agree, it totally did cause at least two hedge funds to lose a ton of money. But most the money that they lost is just reallocated to other large investors and counter-parties. It’s not a blow to the financial market/industry at large.

True, and there’s a certain schadenfreude towards those who invest heavily in the funds to begin with.