Is the recent GameStop story highlighting how little stock price is based on reality?

[MillauFr]

See, but it does. The value of the company hasn't changed just because there was more stock activity. Demand causing a change in price doesn't equate to an intrinsic value of the item. Like stamps or comics. Tulips. Beanie babies.

But in the end, the price still went up, even though GameStop is still the same company it was on Monday. All because people willed it to be worth more.

What intrinsic value does any asset have?

 

[MillauFr]

They doubled down. They blew past the 100% available stock cap of GME to the point where now they owe on stocks that essentially aren't there, around 140%. Frankly, that should be illegal.

This is what I can't understand about the whole debacle. How is it possible to short 140% of the available shares of stock of any company? When you short you are basically shorting individual shares of stock. After that no one else can short that share of stock. I didn't think it was possible for a share of stock to be shorted twice.

 

[DLgal]

What intrinsic value does any asset have?

Assets are defined as being something of value. So, by definition, assets have value. How much is up to whom is buying it and what they think it is worth now vs what it will be worth in the future.

 

[DLgal]

This is what I can't understand about the whole debacle. How is it possible to short 140% of the available shares of stock of any company? When you short you are basically shorting individual shares of stock. After that no one else can short that share of stock. I didn't think it was possible for a share of stock to be shorted twice.

This is why it is so shady. These hedge funds do this all the time.

 

[mefordis]

No, the trading platforms selectively halted BUYING while still allowing SELLING. They cannot just arbitrarily stop trading in that manner. It serves only to tank the stock price, saving the hedge funds while screwing over the other investors. That is very clear market manipulation.

Oh yes on Robinhood's end. I'm sorry. I thought you meant the retail investors who were not acting on inside information by buying the stocks.

Also, currently are actively buying NIO and NAKD - prices going up pretty rapidly.

 

[DLgal]

Oh yes on Robinhood's end. I'm sorry. I thought you meant the retail investors who were not acting on inside information by buying the stocks.

Also, currently are actively buying NIO and NAKD - prices going up pretty rapidly.

They are gonna just keep doing it to all the stocks that these huge hedge funds have shorted. They are trying to break the system and force a change.

 

[MillauFr]

Both the collusion among thousands of individual players to cause a change in share prices..., are probably things the SEC should look at.

For collusion to occur I think you would have to make an argument that an anonymous poster on an internet board has some kind of power over others. That would be a huge stretch.

 

[JimMIA]

No, the trading platforms selectively halted BUYING while still allowing SELLING. They cannot just arbitrarily stop trading in that manner. It serves only to tank the stock price, saving the hedge funds while screwing over the other investors. That is very clear market manipulation.

Not only that, but a selling platform like Robinhood can only affect the transactions of people using its services. They can't influence my trades of any type, in any security -- because I don't use them. So the only people they can stop are their own customers...while the rest of the market roams free.

 

[MillauFr]

Assets are defined as being something of value. So, by definition, assets have value. How much is up to whom is buying it and what they think it is worth now vs what it will be worth in the future.

Yes but the assets value is entirely determined by how much someone is willing to pay for them at a particular point in time.

Making statements like "GameStop isn't really worth $450 a share" is complete nonsense because at some point yesterday its value was $450 a share.

No asset has any intrinsic value. That term is basically a philosophical construct and pretty much meaningless.

 

[JimMIA]

They are gonna just keep doing it to all the stocks that these huge hedge funds have shorted. They are trying to break the system and force a change.

I heard one guy talking today as if the Reddit/Gamestop thing was "Occupy Wall Street 2" -- like they were using their vast social media power to poke "the man" in the eye. I'm not sure what they are trying to break, or how they propose to "fix" it.

But I personally think most of them were just trying to make some quick money.

 

[Lumpy1106]

This is more shady, sure, but not much different from the dot-com boom (and bust), the ENRON debacle, the housing bubble, bitcoin...am I forgetting any?

What can you do though? Take the dot-com rise and fall. Amazon, Google, and Yahoo all came from that. Imagine trying to explain the value of Yahoo back before the internet really took off. It's a search engine - OK, what does it search for? Websites? How do you make money off of that? Well, it does. At the same time though, things like pets.com and egghead were also gaining value for no good reason. Amazon almost went under if not for the pre-sale of Harry Potter books. The speculation investors didn't care though - they had cashed out and bought fancy homes long before the common folk lost money.

That's the stock market though and as long as it has existed and as long as it will ever exist, someone will find a way to game it.

 

[DLgal]

I heard one guy talking today as if the Reddit/Gamestop thing was "Occupy Wall Street 2" -- like they were using their vast social media power to poke "the man" in the eye. I'm not sure what they are trying to break, or how they propose to "fix" it.

But I personally think most of them were just trying to make some quick money.

Well, bankrupting hedge fund companies definitely gets people's attention.

Most of these people doing this aren't gonna make big $$$. They are repeatedly buying the stock at higher and higher prices. It's a game to them. A few who jump out at the right time will make a lot of money, but most people doing this are going to lose money. This is the guise under which Robinhood justified halted buying. Remember that kid a few months ago who though he lost like $200k and committed suicide? Things like that spook these companies. They don't want to be blamed for investors ending up over their heads and then suing them because they "didn't know."

At the end of the day, this situation is going to result in new regulations being made. Free trades are going to be a thing of the past.

 

[DLgal]

Yes but the assets value is entirely determined by how much someone is willing to pay for them at a particular point in time.

Making statements like "GameStop isn't really worth $450 a share" is complete nonsense because at some point yesterday its value was $450 a share.

No asset has any intrinsic value. That term is basically a philosophical construct and pretty much meaningless.

Nothing in the Game Stop companies numbers justify such a stock price and everyone knows it. They were on the brink of bankruptcy.

This is a good illustration of how MANY stocks are overvalued compared to their companies net worth. Tesla is a great example. That company only finally posted a profit in 2020, but yet the stock price is sky high. There is no precedent for an auto company to be so wildly overvalued.

 

[Starport Seven-Five]

Robinhood is taking a lot of the heat for this but it sounds like it was actually the clearing houses that shut down the trading due to raising collateral requirements:
https://www.wsj.com/articles/gamest...ts-clearing-firm-by-online-broker-11611867105

This is what I can't understand about the whole debacle. How is it possible to short 140% of the available shares of stock of any company? When you short you are basically shorting individual shares of stock. After that no one else can short that share of stock. I didn't think it was possible for a share of stock to be shorted twice.

People are selling contracts against shares they don't personally own. Many platforms will allow you to do this if you have a sufficient cash cushion.

 

[MillauFr]

I heard one guy talking today as if the Reddit/Gamestop thing was "Occupy Wall Street 2" -- like they were using their vast social media power to poke "the man" in the eye. I'm not sure what they are trying to break, or how they propose to "fix" it.

But I personally think most of them were just trying to make some quick money.

What surprises me is how little outrage there is in this country to the shenanigans that go on in Wall St. People like Eddie Lampert who come in and buy up a company like Sears and the bleed the place dry by selling off any of its valuable assets. People's lives were destroyed by people like him.

 

[MillauFr]

This is a good illustration of how MANY stocks are overvalued compared to their companies net worth. Tesla is a great example. That company only finally posted a profit in 2020, but yet the stock price is sky high. There is no precedent for an auto company to be so wildly overvalued.

People said the same thing about Amazon. They said how can a bookseller be worth so much? Actually a bookseller is worth close to zero because that is a terrible business. Even the entire rest of their retail operation really isn't worth much of anything. It is Amazon Web Services which contains all of the value of the company.

I think Tesla is the same way. Manufacturing cars isn't a profitable business long term. I think the vast majority of the value of the company is really in its technology systems.

 

[superme80]

What surprises me is how little outrage there is in this country to the shenanigans that go on in Wall St. People like Eddie Lampert who come in and buy up a company like Sears and the bleed the place dry by selling off any of its valuable assets. People's lives were destroyed by people like him.

Don't get me started on him! I had to explain to my kids about people like him. We still have Kmart in our area, and they wondered why it is going down the drain.

 

[AlohaNow]

I'm willing to bet that the SEC won't even get up out of it's chair to look into this.

 

[Brett Wyman]

The tiny bit of anarchist in me loves this. But as someone roughly mid-career(i.e. I’m not a boomer but I am getting old) I’m scared to check my 401k!

 

[RamblingMad]

The stock market is not the economy. Something is only worth as much as someone is willing to pay for it.