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Redditors gave Wall Street traders an absolute pasting

jcrossan said:
Word tonight on the chatroom is they are going to pump a silver stock First Majestic Silver which has a lot of short action. Its up 18 per cent in after hours trading..

Damn..have held a big chunk of the stock for six month...could be a day and a half tomorrow. Could be a fun ride (I hope) in the morning. Bought it for investment long term but if a bunch of millennials wanna pump it then go to it boys..
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I have three letters. S e and c
 

What is their end game? (WallSreetBets)

There's more today Nokia, Blackberry, Koss Corporation, Naked Brand.......

If this continues will it not crash the market?

@monkeytassle
 
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This seems very high risk, and the ability to get out with a profit is dependent on knowing the exact exposure of the hedgefunds. Falsely inflating the price of a share in a failing company is going to make zero difference to that company's viability and leaves you with the risk of holding some worthless paper if you don't get out at the right time.
 
monkeytassle said:
I have three letters. S e and c
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A quick Google suggests the SEC can only flex it's muscles if investors have been manipulated into buying on the basis of false information. If you went into this with your eyes wide open then what is wrong (unless one of the Reddit community is falsely claiming the stock has been shorted)? On that latter point, that's how I think this will end: this is wide open to abuse.
 
Patch said:
A quick Google suggests the SEC can only flex it's muscles if investors have been manipulated into buying on the basis of false information. If you went into this with your eyes wide open then what is wrong (unless one of the Reddit community is falsely claiming the stock has been shorted)? On that latter point, that's how I think this will end: this is wide open to abuse.
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3 dollar stock goes to 200 with no change in company revenues or expectations.
 
monkeytassle said:
It's blatant market manipulation. I wouldn't want to touch it. Clearly some of these firms are toast.
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Was just about to say this all seems way too 'easy'. I was going to ask what the rules are on this stuff because i saw some clips on twitter of US government & wall street complaining about it.
 
BrumBlue said:
Was just about to say this all seems way too 'easy'. I was going to ask what the rules are on this stuff because i saw some clips on twitter of US government & wall street complaining about it.
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It's the mechanics of the system. If you are a stock borrower the lenders asks you to post some money against it. If they think you won't be able to repay the full amount they'll force you to liquidate the position. No matter what the price. So this is all driven by the plumbing of the system rather than the actual stock valuation. It's part and parcel but I wouldn't want my name anywhwre near this sort of behaviour. There'll be sub poeanas and lawsuits all over the place.
 
monkeytassle said:
It's the mechanics of the system. If you are a stock borrower the lenders asks you to post some money against it. If they think you won't be able to repay the full amount they'll force you to liquidate the position. No matter what the price. So this is all driven by the plumbing of the system rather than the actual stock valuation. It's part and parcel but I wouldn't want my name anywhwre near this sort of behaviour. There'll be sub poeanas and lawsuits all over the place.
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Let’s be fair plenty of sustainable companies have been forced out of business by being shorted. The beautiful thing about this of course is that with a ‘community” acting together it gets around the limits on stock ownership. The small guys own actual stock which the hedge fund shorters must buy. The “community” needs to somehow agree that they will not sell below x.
 
monkeytassle said:
It's the mechanics of the system. If you are a stock borrower the lenders asks you to post some money against it. If they think you won't be able to repay the full amount they'll force you to liquidate the position. No matter what the price. So this is all driven by the plumbing of the system rather than the actual stock valuation. It's part and parcel but I wouldn't want my name anywhwre near this sort of behaviour. There'll be sub poeanas and lawsuits all over the place.
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Can you explain why it’s illegal though?
 
daventry cat said:
then they would be no better? although i can see the temptation
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I suppose the difference is that the people benefiting if they sell up at the right time are by and large ordinary people who are using their savings (or in some cases in this one, their coronavirus stimulus cheques), as opposed to multi-billion hedge funds run by people who own gold-plated moons. It's that Robin Hood, turning the system against itself angle that's made a lot of people find this interesting or funny.
 
Chal said:
Just seen that it was steadily rising last week and had some money in my account, pure luck really

I took out my initial investment so all that's in there now is profit
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If someone works out a way to identify which businesses that are sustainable are being shorted and then organizes millions of people to take this approach it would work. Sell to get back your initial investment only then organize to only sell a percentage of what your remaining - say 5%. Eventually the stock will drop right off but everybody will have taken a profit at the expense of the dodgy hedge funds and hopefully the business would also have got a cash injection.
 
HellsBells said:
à
Can you explain why it’s illegal though?
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The sec presides over markets and aims for "fair, orderly and efficient" markets. If they think a person or group of people are acting against this they will take action. I don't give 2 figs about the hedge funds that have lost money and nor will the regulators. What they will care about is influencing stock prices.

I'm not even getting near this. Absolute accident waiting to happen.

Fwiw this is good for banks and financing so the conspiracy theorists are already wrong.
 
Market Where? said:
If someone works out a way to identify which businesses that are sustainable are being shorted and then organizes millions of people to take this approach it would work. Sell to get back your initial investment only then organize to only sell a percentage of what your remaining - say 5%. Eventually the stock will drop right off but everybody will have taken a profit at the expense of the dodgy hedge funds and hopefully the business would also have got a cash injection.
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Who's going to buy up all the shares when everyone decides to sell?
 
Titus said:
Who's going to buy up all the shares when everyone decides to sell?
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That’s the point of organized buying and then selling. The risk of shorting is that they end up “ owing” more stock than is actually available. If the millions of people in the community own that stock then the big shorting hedge funds have to buy. If the community restricts how much is on the market each day - so you agree to only sell 5% of your own holding - then the hedge funds have to buy. At some point they will have covered their position and the stock will dramatically reduce in value but by effective coordination the community will all have made a sizable profit.
 
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