Largely because the "gamestop maneuver" has inflammed an already excitable community and things are likely bubbling over right now in a way that they wouldn't be if people hadn't just bet thousands of dollars on a tulip scam.
And let's not euphemize this, it's not a "maneuver", it's market manipulation. Coordinating a collective buy to effect a short squeeze is clear market manipulation. Enticing a horde of gullible forum users to buy the same ballooned stock based on ideas like "stick it to the man" and "turn their tricks back on them" is an even clearer pump and dump scheme.
This doesn't end well for anyone (except Gamestop's pre-existing shareholders I guess). The hedge fund got fleeced, the gullible WSB users are going to lose a ton, Robinhood flushed their brand down the toilet trying to avoid being an accomplice to all of this, and the only folks who made money on the deal are more likely than not in the SEC crosshairs now.
No it's not market manipulation. Its counter party risk gone awry and the entirety of the internet finding out about it at the same time.
In my view, hedge funds have implicitly colluded for years on short positions because it's in their best interests not to screw each other over the long haul. Imagine going against Citadel as a fund. Your career is over. The fact the short interest rose to 140% is proof of that.
This trade should have been shaken out sooner, but no one would dare given the powers that be who were backing it. Also, consider the bond holders as true original victims here. Is it right that they had people artificially putting downward pressure on the security of a company that is indebted to them? If you believe in reflexivity, this is depriving lenders of a fair security valuation, which is an asset of sorts, and further driving them towards a delisting or bankruptcy.
> no one would dare given the powers that be who were backing it
But now that it has been done once, more people will be interested in these opportunities in the future. Quoting from Iron Man 2: If you could make God bleed, people would cease to believe in him. There will be blood in the water, the sharks will come.
> In my view, hedge funds have implicitly colluded for years on short positions because it's in their best interests not to screw each other over the long haul. Imagine going against Citadel as a fund. Your career is over. The fact the short interest rose to 140% is proof of that.
Reality says otherwise. Hedge funds get into trouble at the expense of hedge funds taking the other side of the bet all the time. Their entire business model is based around claiming the ability to beat the market by winning zero-sum bets, and in the long run the more funds they screw over the better their reputation and the more fund management fees they collect. Not going against downward pressure on a security if you think the other fund is undervaluing it and the risk is tolerable is literally leaving money on the table.
As for Citadel, they'll be delighted that a fund got into so much trouble it begged them for a bailout on whatever terms Citadel was willing to offer (and used the funds to unwind its exposure to that market).
They've been very public and transparent for all to see about their strategy. It's a very common play when naked shorts are this exposed. The WSB side of this is a distraction. Michael Burry of Big Short fame has been talking this trade and pouring hundreds of millions into this gamma squeeze since the summer.
See, this is why someone is going to jail. This explanation is wrong. Someone lied to you, and they probably lied to you to make this look like a sure bet so that you'd buy (and thus pump) a stock that is otherwise going to crash, so that they can unload their position before it does. You got scammed, and the person who did it is guilty of a crime.
FWIW: Short leverage higher than 100% is not naked selling. It just means (as an example) that you borrowed a share, sold it, then later on that buyer loaned the same share back to you, and you sold it again. This is not a good idea, but it's not naked selling (which is itself securities fraud).
yes the GME crowd-source scenario is definitely market manipulation, it is the very definition of it. the question is, can any single person or group of people be identified as culpable? that is the beauty of it, in a way.
you cant tell if someone has a naked short position on. they are exceedingly rare, and most likely ephemeral, and most likely caused by a back-office error rather than deliberately. i dont think you know what you are saying
How does a pump and dump work if you realized your losses before you even bought the stock and never end up selling? In my opinion the value of GME is $0 and that doesn't stop me from wanting to buy more but never selling ever because of the entertainment value.
And let's not euphemize this, it's not a "maneuver", it's market manipulation. Coordinating a collective buy to effect a short squeeze is clear market manipulation. Enticing a horde of gullible forum users to buy the same ballooned stock based on ideas like "stick it to the man" and "turn their tricks back on them" is an even clearer pump and dump scheme.
This doesn't end well for anyone (except Gamestop's pre-existing shareholders I guess). The hedge fund got fleeced, the gullible WSB users are going to lose a ton, Robinhood flushed their brand down the toilet trying to avoid being an accomplice to all of this, and the only folks who made money on the deal are more likely than not in the SEC crosshairs now.