To The Moon

It's been two years since the GME event, and let's see what's happened in those two years

Timeline:

$GameStop(GME)$ continuous losses, targeted by short

The major video game retail company "Game Stop", mainly sells game discs, but also sells game magazines, game peripherals and character figures.

Many people have a strong emotional connection. But the problem is that fewer and fewer people are buying game CDs these days. The business situation of GameStop can be said to be deteriorating in the past few years. Earnings are terrible and the stock is naturally performing badly, with a low of only $3 per share.

In 2019 it then announced that the company's losses reached $470 million; in 2020 the world's pandemic and Americans spending less. The game station is naturally worse off and had to permanently shut down 300 stores.

Long and short positions arrive on the battlefield

In September 2020, Ryan Cohen, the founder of pet food e-commerce giant Chewy, took a 13% stake in GameStop. His entry was a shot in the arm for GameStop.

Ryan Cohen

On January 11, 2021, GameStop appointed Cohen and his two partners to its board of directors, hoping that they could lead the company out of its difficulties. The stock price at the time was $20, which many investors felt was good news. Two days later, the stock price rose 60%, to $31.40.

The rise in the stock caught the attention of two groups of people at the same time.

One group of people were WSB users who originally loved this game CD store that carried the sentiment of so many years in the past; they encouraged each other on the forum and urged everyone to buy this stock.

The other group of people who heard the news were financial institutions that are good at short.

First Battle

On January 19, Citron Capital published an article arguing that GameStop was grossly overvalued and that the stock price would fall back to $20.

The comments created a big stir on WSB. Some netizens called on all retail investors to unite and buy GameStop to face off against the "greedy predators" of Citron Capital. In the following two days, the stock price kept rising.

Second Battle

On January 21, Andrew Left, the founder of Citron Capital, couldn't help himself and made a video to explain his five reasons for being bearish on GameStop, predicting once again that GameStop's share price would fall back to $20.

WSB users, of course, took Left's comments as a challenge and started buying shares like crazy, raising the price of the stock by 50% to close at $65 the next day, and the WSB users wanted to teach the arrogant short-sellers a lesson by "short-selling" them, making them suffer huge losses.

They came up with an inspiring slogan called yolo (you only live once), since people only live once, so don't worry too much, this current opportunity to join forces to teach Wall Street predators is a once-in-a-lifetime opportunity, we should boldly follow up, the stock price speculation to the sky, while making a big profit for themselves.

Eventually, Citron had to reopen its account and said it would no longer comment on GameStop and pledged to leave the market.

So far, the bloodbath between "Wall Street Bets" and the so-called "evil financial forces of Wall Street" has been inevitable. Since then, the share price of GameStop sawed back and forth between 200-400, and in the opinion of Wall Street Bets users, the stock price would never stop until it rose to $1,000.

On the one hand, retail investors began to buy large numbers of call options. On the other hand, market makers, faced with ever-higher stock prices, knew that the original unlikely miracle became more and more likely to be achieved, that is, their own exposure to risk became higher and higher. This is called the "negative gamma effect" in finance, and in short, market makers have to buy a lot of shares in order to reduce their risk.

On January 29, 2021, GameStop's share price reached an all-time high of $483. Half a month earlier, it had been just $20 or $30.

More players join this battle

In this process, not only the main battlefield of the game station but also some other stocks with very bad fundamentals were also speculated high, some people called these stocks "Wall Street Bets concept stocks".

For example, $AMC Entertainment(AMC)$ is the largest theater company in North America, last year the pandemic, a large number of movie theaters closed, even if they insist on opening there are not many viewers, but also few of the latest movies can be released.

AMC has also been targeted by WSB subscribers and its stock price has doubled several times, and its rise is all dependent on the sentiment driven by the game stations.

In addition, stocks like $BlackBerry(BB)$ and $Nokia Corp.(NOKBF)$, which have been in the doldrums, have recently had a spectacular performance, which is also related to the market brought by the game station. These "Wall Street Bets concept stocks" have only one common feature, that is, they have a deep affection for the users.

On the other side of short-selling is a large number of hedge funds. In addition to Citron Capital, another high-profile fund is Melvin Capital, which manages more than $10 billion in capital and has lost 30% of its market value in the shorting spree.

A number of other funds have raised billions in capital against Melvin Capital in an attempt to salvage it, but many are now so deep in the hole that some financial firms estimate that short sellers have lost nearly $20 billion on the gaming post this year.

Of course, one would not be naive to think that all the money going long is retail money. In fact, there are many institutions mixed in the retail investors to fish in the water, but they will not be publicized.

Two years after this event, have you ever been a part of this investors‘ party?

Would you choose to hold firmly or let go now?

If the next party comes, what will you do?