> "It is very clear to anyone looking at the numbers that the whole marketplace is being manipulated here"

I don't get this.

I didn't know anything about short selling a few days ago and maybe now is a bad time to learn... but my understanding is that short selling is only legal because it disincentivizes bubbles caused by artificial overestimation of a company. Investors took it too far and short sold over 100% of the stocks in a company, ironically creating ideal conditions for a bubble. As soon as GameStop's stock turned upward, the rampant short selling resulted in a demand for more than 100% the supply of GameStop's stock, resulting in a meteoric rise in price.

But how is this market manipulation? The rise in stock price has nothing to do with an artificial overestimation of GameStop's value. It's just fundamental supply and demand. If anything, the short sellers are the ones who manipulated the market when they started shorting over 100% of the stock supply.

Like I said, I'm a complete noob when it comes to the stock market. Maybe I'm misunderstanding something?

No. You aren't misunderstanding anything. That's exactly what happened.

The "problem" here, is that the little guys noticed. Michael Burry and some unknown YouTuber saw this over a year ago and started buying GameStop, and making a case for people to buy GameStop.

This is very easy to understand. The wrong people are losing money. And that can't be allowed. That's all you need to know for this to make sense.

I'm not an expert but it seems to me that this whole 100% thing is a total red herring. If I (A) have 50 shares in GME, I let you (B) borrow them and short sell them to person (C), person (C) now owns them, you (B) can borrow them from person (C) and short sell them to person (D). Suddenly you've short sold the same stock twice.The only issue for you is that you now need to buy back 100 stock to pay off what you've borrowed, which you could do buying the stock from person (D), giving it back to person (C), buying them frmo person (C) and giving it back to person (A).

The only issue comes if someone notices that you've done this, pushes the price up to the point where you have to exit your position because your broker won't let you hold this short position that you can't afford to pay for. At that point you must exit, which drives the price up even further because you're creating demand for the stock.

What's important to notice about this is that the second you're no longer short the stock, no one has any incentive to hold the stock. So it'll return to $20 and all those super smart boys on WSB who were holding out for $2000 have thousands of shares of a worthless retail stock that they probably bought on margin and are going to lose everything.

Yes. When the dust settles there are still 70M almost worthless original shares that will be held by someone.

But in the meantime, there are 70M short shares that need to be rebought from the 140M original+loaned shares. The idea is that forcing closing out the short position will allow you to sell some at sky high prices, hopefully enough to cover the loss from the rest of the shares that must be inevitably bagheld.

100% of float or 100% of outstanding are not super significant inflection points, just very large ratios.

Not necessarily. Those shorts exist for a reason: someone thought that gamestop was a bad company. If they are right then the short position won't need to be bought back because at some point the bankruptcy court will decide that the share holders get nothing. At this point all trades on the stock are legally halted and so the IOUs are legally meaningless - anyone who owned stock gets nothing.

Of course the above depends on the short holders to: be right; have the capital to not have to cover their shorts; and be willing to hold on for the ride. I'm not making bets on any of the above.

Hi everyone, thank you for joining our Gamestop company all hands, I'd like to introduce our new CEO and majority shareholder, soon-to-be bankrupt guy from reddit.

People conspiring to push prices in one direction is a clear cut market manipulation and I believe a criminal offence in most jurisdictions.

It's fine to have lots of people buying something, but if they discuss how they can coordinate to hurt short sellers or something like that, particularly on a public forum, despite not being a lawyer I am fairly confident this is prosecutable.

Market trading regulations are full of fine lines where the wrong side can land you in jail. For instance the difference between front-running and pre-hedging / anticipating market liquidity is basically the intent and the information the trader has. The actions are indistinguishable.

They can halt trading of the stock all they want. All exchanges do [0]

But the crazy part is that they only halted one side of the trade... the buy orders. That is manipulation.

Personally, this cost me £1k on Nokia. I went from +£700 to -£1000 over the course of about 30 mins, because the market was pulled from under me.

[0] https://www.nyse.com/trade-halt-current

Exchanges halt trading, is Robinhood an exchange?

>But the crazy part is that they only halted one side of the trade... the buy orders. That is manipulation.

Exactly, I mean you could make the argument to stop selling: "The current price is being manipulated and is too high so we stopped our customers from selling if they mistime the market. We will resume selling when prices return to normal."

Edit to add from /wsb:"If you try to sell you will get fucked because who are you going to sell it to if nobody can buy it?"

I hope there is some meaningful action by the SEC. It would be interesting to have all the trades reversed to the point when buying was stopped.

>> helping mitigate risk for our clients

It's cute when they phrase it like that, though everyone understands that it should be "chosen clients that make us most money"

Apparently Citadel is in bed with Schwab/Ameritrade, too, who also halted trading:

"The Verge meanwhile noted one hedge fund suffering amid the GameStop surge was Melvin Capital Management, which another hedge fund, Citadel, has since bailed out. Citadel's founder is Ken Griffin, who also founded Citadel Securities, a big investor in Robinhood that also works with TD Ameritrade and Charles Schwab."

I suspect they sell them the trading data just like Robinhood does, to help them front-running the retail traders.

https://theweek.com/speedreads/963627/robinhood-halts-tradin...

And they were probably informed in advance that Robinhood was about to limit trading so they could short the stock at the exact right time.

I think you're entirely right, but Citadel is the customer Robinhood is protecting. The retail investors are the product.

Yes its why Robin hood is "free" but people are ignoring that maybe

In this case, the "restrictions" seem clearly aimed at retail investors, and intended to help those with short positions.

But trading Tesla is OK? Oh wait that's a darling of WS, so it's OK. /s