These are the right to buy shares at a certain price and they effectively function as a leveraged bet, a purchase that only requires you to pay a fraction of the share price.
This is the fuel that stokes the short-squeeze fire. During the financial crisis, shorting became a byword for vulture capitalism. Hedge funds were accused of deliberately driving companies into the ground by taking out billion-dollar short positions, artificially pushing down share prices to the point that they collapsed, when they might otherwise have survived. Several national financial regulators across the world imposed temporary bans on short-selling certain vulnerable stocks — such as banks or insurers during the post financial crisis — or even blanket bans on the practice.
There is evidence that shorting can accelerate the downward movement of share prices, as big bets on corporate failure become a self-fulfilling prophecy.
The counter-argument is that you cannot successfully short a healthy company, as your bet will simply turn out to be wrong. Furthermore, short-sellers can act as an early warning system highlighting bad businesses. And at least on paper, ordinary investors are making money even if they're not paying attention. BlackRock, which operates mutual funds, may have made billions of dollars from the rise in GameStop shares alone.
But the bigger and longer-lasting impact may be on how the market itself operates. Never before has a group of amateur investors taken on a hedge fund like this and won. The battle over GameStop has taken on something of a David vs.
Goliath feel, with some people outside of finance painting it as a reckoning for parts of Wall Street. Elizabeth Warren, D-Mass. Or, as Reddit co-founder Alexis Ohanian put it on Twitter , the GameStop squeeze is "the public doing what they feel has been done to them by institutions. This is something to believe in," he said. There is some belief that WSB signals the arrival of a powerful new force as large numbers of retail investors find influence by acting in concert or following one another into a big trade.
That may serve as a check or balance on other large forces, such as hedge funds, which are used to throwing their weight around without ordinary investors affecting a price.
That's a tough question. Right now, the speculation activity is only around a few companies, which isn't that uncommon. But the broader concern comes when what are known as retail investors — amateurs buying stocks for their own personal gain — become overly exuberant and inflate stock prices , sometimes by taking out loans to buy shares. And some skeptics point to the situation around GameStop and other companies as evidence that the stock market has reached a dangerous level of enthusiasm and speculation.
Massachusetts regulator William Galvin compared the situation Wednesday to the tech stock bubble. Often, a short squeeze ends in a price's falling back to where it was before the drama started. In , when Volkswagen was in the middle of a trader tug-of-war, it briefly became the stock market's most valued company , but its price settled down eventually.
History suggests that no stock can go up forever, and over time, stock prices generally reflect the expected future earnings of corporations. But long shots can go on for extended periods if the players have enough resources to risk.
Tesla, for example, would need 1, years of profits to justify its current price-to-earnings ratio, according to a calculation this month. GameStop shares may move by about 20 percent a day through March if options trades are an indication, Barron's reported.
There's no evidence that any of this is illegal, although Nasdaq CEO Adena Friedman has said stock exchanges and regulators need to pay attention to the potential for schemes fueled by social media. Reddit didn't answer questions Wednesday about whether it's in touch with regulators, but it said it prohibits posting illegal content or facilitating illegal transactions.
Galvin said he believed federal regulators would take some action. White House press secretary Jen Psaki said Wednesday that the Biden administration's economic team was " monitoring the situation " around trading in GameStop.
However, buying back the shares only adds to demand for the stock and pushes its price higher still. And amateurs aren't the only ones getting in on the action. This week, for example, private equity firm Silver Lake Group, which had loaned money to AMC Entertainment, converted its bonds to shares after the surge in the firm's prices, a swap worth hundreds of millions of dollars.
In the US, anger over the trading restrictions united politicians whose stances typically sharply diverge. Senator Sherrod Brown, a Democrat who is taking over as chair of the banking committee, said he would hold a hearing about the "state of the stock market". People on Wall Street only care about the rules when they're the ones getting hurt. It's time for SEC and Congress to make the economy work for everyone.
As Incoming Chairman of the SenateBanking Committee, I will be holding a hearing on the current state of the stock market. Rep Alexandria Ocasio-Cortez, known for her leftist views, called the restrictions "unacceptable" and expressed support for a hearing, to which Sen Ted Cruz, a staunch Republican, replied on Twitter, "Fully agree".
Dave Portnoy, founder of the Barstool Sports blog, who has emerged as one of the most high-profile amateur traders during the pandemic, also attacked the restrictions, singling out Robinhood, which has cast itself as a platform aimed at making Wall Street more accessible. The firm also makes money through fees paid by Wall Street firms that execute trades for its users. And it turns out RobinhoodApp is the biggest frauds of them all.
Analyst Neil Wilson said that Reddit chat threads, suggest the day traders' battle with Wall Street is personal. They seem hell-bent on taking on Wall Street, they seem to hate hedge funds and threads are peppered with insults about 'boomer' money. Elon Musk, who has a history of feuding with short sellers , also joined the fight, tweeting: "Here come the shorty apologists. Give them no respect. Get Shorty. A one-word tweet by the billionaire entrepreneur on Tuesday - he tweeted "Gamestonk!!
The fracas follows a jump in casual investing during the pandemic, which saw people stuck at home with time on their hands and limited places to spend pour money into the market.
0コメント