1/ If you've felt like stock market has been disconnected from reality for the past few days, you're not alone
this is the story of the magic bubble created by amatuer traders that broke a multibillion dollar hedge fund
this is the story of the magic bubble created by amatuer traders that broke a multibillion dollar hedge fund
2/ To understand the market right now is to understand r/WallStreetBets
it's a 2.3 million person subreddit dedicated to memes and YOLO Tesla calls that relishes in the massive swings that come with risky trades
aka heaven for the hyperactive amateur trader
it's a 2.3 million person subreddit dedicated to memes and YOLO Tesla calls that relishes in the massive swings that come with risky trades
aka heaven for the hyperactive amateur trader
3/ The other main character in this saga is GameStop
it's a mall-based retailer that is saddled with debt ($450 million as of Q4 2020) and falling sales (down 40% in last 2 years)
essentially, it's the Blockbuster of video games waiting to be eaten by a Netflix
it's a mall-based retailer that is saddled with debt ($450 million as of Q4 2020) and falling sales (down 40% in last 2 years)
essentially, it's the Blockbuster of video games waiting to be eaten by a Netflix
4/ So hedge funds have been shorting it
the pros on Wall Street saw a failing business and took positions where they would profit if the stock falls
in fact, it's the single most shorted stock in the entire Stock and S&P 500
the pros on Wall Street saw a failing business and took positions where they would profit if the stock falls
in fact, it's the single most shorted stock in the entire Stock and S&P 500
5/ One hedge fund in particular called Melvin Capital held a $55 million short position against GameStop
Melvin also held large short positions against National Beverage, iRobot, and Bed Bath & Beyond
big mistake
Melvin also held large short positions against National Beverage, iRobot, and Bed Bath & Beyond
big mistake
6/ Soon after the market opened yesterday, look what happened
GameStop: +64%
iRobot: +42%
Nat. Beverage: +26%
Bed, Bath & Beyond: +19%
Melvin got absolutely obliterated
GameStop: +64%
iRobot: +42%
Nat. Beverage: +26%
Bed, Bath & Beyond: +19%
Melvin got absolutely obliterated
7/ Who's behind these ridiculous swings?
r/WallStreetBets
they had seen Melvin's shorts and mobilized en masse to blow them up
and yes, it's possible for the little guy to take on a multi-billion dollar hedge fund right now
r/WallStreetBets
they had seen Melvin's shorts and mobilized en masse to blow them up
and yes, it's possible for the little guy to take on a multi-billion dollar hedge fund right now
8/ Melvin got caught in a short squeeze
as traders piled into GameStop, Melvin was forced to buy shares to cut some of its losses...which only drove the price higher
and remember, GameStop is a failing business
this was just r/WallStreetBets flexing on "the establishment"
as traders piled into GameStop, Melvin was forced to buy shares to cut some of its losses...which only drove the price higher
and remember, GameStop is a failing business
this was just r/WallStreetBets flexing on "the establishment"
9/ And poor Melvin?
after averaging a 30% yearly return since it was founded in 2014, its DOWN 30% to start the year
it had to take in $2.75 billion in outside funding to stay afloat
after averaging a 30% yearly return since it was founded in 2014, its DOWN 30% to start the year
it had to take in $2.75 billion in outside funding to stay afloat
10/ GameStop's crippled one hedge fund, but ain't done yet
earlier today, billionaire investor @chamath bought $115 call options meaning he thinks the stock will keep on rising
despite his slightly tongue and cheek bullishness, the stock is skyrocketing once more today
earlier today, billionaire investor @chamath bought $115 call options meaning he thinks the stock will keep on rising
despite his slightly tongue and cheek bullishness, the stock is skyrocketing once more today
11/ It's been a wild few days, completely detached from reality
but if GameStop teaches us one thing
it's that technology has leveled the playing field
the little guy can now mobilize online and go to-to-toe—and win—against the heaviest hitters on Wall Street
but if GameStop teaches us one thing
it's that technology has leveled the playing field
the little guy can now mobilize online and go to-to-toe—and win—against the heaviest hitters on Wall Street
• • •
Missing some Tweet in this thread? You can try to
force a refresh
