And when a lawyer says "interesting," they mean "expensive."
> Where things get interesting (and fuzzy) here that I’m not quite sure where the line is between a group working together to influence the market and just... the market.
I think it's also noteworthy here that the short interest was at least initially over 100%. That's a powder keg; you don't "create" a short squeeze in that environment so much as just wait for any random spark to cause one.
If it comes down to the SEC prosecuting individual members of WSB (where they can't prove misrepresentation), I think there will also be substantial first amendment arguments at play. One recent rallying call of the bubble has been to buy and hold GME stock as a protest against hedge funds / the stock market as a whole, and on the face of things that's political protest. The SEC isn't in the business of investigating other politically motivated stock boycotts, so a politically-motivated stock purchase should also be treated with kid gloves.
> That said, there are definitely a handful of individuals on WSB who got the ball rolling and have profited heavily.
From what I can tell, RoaringKitty/DFV is less likely to be a target of a market manipulation charge because their arguments were made well over a year ago and were ultimately ones of value; the profit did not depend on causing a short squeeze, and DFV in fact took profit from a large portion of their initial stake by the end of 2020 (before the squeeze).
The linked post is more direct in "these purchases will cause a short squeeze," so it could more credibly be called manipulation. But again, the powder keg makes the analysis weirder.
But the people saying things like "buy GME and call your broker to instruct them not to lend your shares" or encouraging people to go "all in" and the comments specifically encouraging others to buy GME to screw $hedgeFund have left a pretty clear paper trail of their intent to induce others to purchase and manipulate the market.
I kind of doubt this. Lightning rarely stricks twice, and unless he has a history of these sorts of moves who knows if he'll have a pick like this again.
Also, the money would have to be reallly good considering he's by-far set for life after this.
My biggest concern for him at this point is that he'll get dragged in to investigations regarding this. I agree with you that he specifically doesn't seem to have done anything wrong. I don't think he even ever said "You should do this", or insinuated that others should; it was just a "This is what I'm doing and here are my reasons why".
I hope the next couple years of his life aren't an absolute shit-show dealing with fallout of being the most "high profile" name (so far).
"Contrarian investors may buy stocks with heavy short interest in order to exploit the potential for a short squeeze"
Are you suggesting that is illegal?
And are you suggesting something diferrent than that happened here? If so, what made it different?
> exploit the potential for a short squeeze
Not illegal.
> Take action with the explicit intent to cause a short squeeze
Yes illegal.
Context matters though as to which side a given situation might come down on.
But yeah, it's possible if you have that intent in your mind, somehow it makes it illegal, the laws don't always make sense and I'm not an expert here.
I am pretty confident that large traders do this all the time though, have the intent to cause a short squeeze. But I wouldn't be shocked if there's something illegal that traders do all the time anyway (without advertising it on the internet!).
For millions of manic amateurs, it's mania and collusion. The planning of it is evidence.
So become rich, before you break laws, seems to be the moral hazard here.
Would things get fuzzier if just one person bought $100K worth, which the post claims would be sufficient to trigger a squeeze?
(Just asking theoretically, I'm not a participant :)
Calling anything the retail / WSB investor crowd did in this scenario “manipulation” is ridiculous and insulting. “Coordinating” by explaining a strategy and inviting others to participate is not “manipulation.”
Oh, and you might want to google Phil Falcone.
I worked as a fund manager at an asset management firm for a few years, often sitting daily with our general counsel on many issues. Nothing you have said about this, including the totally off the wall comparison with Phil Falcone, causes me to believe your take is trustworthy here. I’m not a lawyer, but just because you allegedly are one doesn’t mean I’m going to take your opinion on this at face value.
> often sitting daily with our general counsel on many issues
I think you think this somehow bolsters your (again, completely emotional) argument? On the contrary, this is a pretty good indicator you don't understand federal securities laws. And I must say, I concur with your former GC's assessment.
I don’t know why you’re waiting on that. It’s absolutely not my job to go item by item through the comments and chronicle it for you, that’s on you if you care (or don’t, I don’t care, and I won’t be baited further). I just felt somebody needed to mention that they don’t take what you’re saying as accurate or trustworthy.
No one is asking you to "go line by line", but right now you're just yelling "YOU'RE WRONG I'M RIGHT" without even specifying what you're talking about.
In this particular case I think the arguments have been repeated many times across all the different GME threads. My goal is not to repeat them here, only to register dissent, which is a perfectly valid goal for me to have.
I'm sorry are you trying to make an argument that GME right now is based on evaluating the fundamentals?!?
> “Coordinating” by explaining a strategy and inviting others to participate is not “manipulation.”
Frankly, you're kind of right, if the premises of those strategies are valid, and are not "If we manipulate the value high enough", then it is not illegal market manipulation.
If the premise of your strategy is "manipulating the price of availability", then yes, it is. If the strategy is just blatantly factually wrong or fraudulent, then yes, it is.
I’m saying the author of the article (the reddit post) approached valuing it based on fundamentals. That is the whole point of a short equity squeeze - a stock’s valuation is predicted by many (wrong folks) to fall, institutional money takes a large short position, but a few smart speculators see a valuation-based reason why the price will actually (truly, not artificially) go up, thus squeezing the short sellers. The strategy kicks in only at that point, when buying and holding (based on speculating more intelligently about the true valuation) leads to further gains because of the short sellers’ situation. The reddit author even says explicitly - this is not a pump and dump, the stock will stay high.
Sharing a smart analysis and offering others the chance to execute the same strategy is not manipulation. It’s just a smart strategy. This guy and others who saw the opportunity early, realized GME was both fundamentally undervalued and also had super high short interest, just out-smarted professional traders and they are mad, so resorting to backchannel politics to drum up claims of “manipulation.”
Oh well I mean if the reddit author said it....
If you're arguing that it will stay high, you're saying that based on the fundamentals of the company GameStop should be a $20B company. Which is bonkers.
Your sarcastic “.. if the reddit author said it” totally misses the point. The point is not whether the reddit author is right only the reddit author is actually describing their honest strategy based on fundamentals.
Given the specificity of the strategy and the fact that it actually did turn out to be right it would seem like an extreme claim requiring extreme evidence to disagree or to presume some ulterior secret market manipulation motive.
Separately, I for one am not sure you are right to say $20B market cap of GameStop is crazy. I think it will drop yes, but not nearly as far as most people think. The change of board management for GME is quite a big signal of the large-scale ecommerce revamp they plan to execute, and that strategy was executed by the new board member previously at Chewy, so there is actual track record to believe this.
The valuation is high right now, sure, but I sincerely think it’s not crazy high. That’s why a lot of the WSBers and redditors are still refusing to sell. The plan absolutely was not a pump and dump, it was more like jumping on an airplane before it takes off - at least in their minds. Time will tell.
> "Market manipulation" itself is not necessarily illegal, if you just mean doing things that will effect the market in a way to bring profit to yourself.
I’m not quite sure what you mean by this. Market manipulation is a concerted (and sometimes coordinated) effort to artificially influence the supply or demand of a security. Market manipulation often relies on false information but false information is not at all a required element of market manipulation.
Where things get interesting (and fuzzy) here that I’m not quite sure where the line is between a group working together to influence the market and just... the market. I suppose its theoretically possible for everyone in the market to coordinate against one or a few players. To my knowledge there’s never been a situation with such a large coordinated effort.
That said, there are definitely a handful of individuals on WSB who got the ball rolling and have profited heavily. I definitely think the SEC could make the case they've violated the Exchange Act and potentially the '33 Act depending on what % of $GME the group controlled.