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Old 28th January 2021, 12:07 PM   #161
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Okay. So I ask again. What did the Redditors do wrong that isn't the exact same thing?
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Old 28th January 2021, 12:12 PM   #162
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Originally Posted by lomiller View Post
It doesn't matter. Both are illegal.
If that's true, how do hedge fund managers short a stock and then go on CNBC and squak about how horrible that stock is?

The answer is that it's not true. As long as you aren't deceptive/misleading you can say what you want about stocks wheather you buy them or not. If you believe what you are saying (and your transactions reflect that) and just telling people your reasoning for doing so, no problem.

That's what they've done on WSB. There was one guy on there, u/deep*******value (DFV), who was in on GME since 2019. Got ridiculed for his positions there. But he explained his reasoning. Fast forward to recent history and people started seeing that his reasoning was sound and joined in, which is when all the shorting became apparent and they reasoned that there was a squeeze opportunity and encouraged each other to buy and hold. They didn't lie or mislead anyone. They didn't say, "GME is actually worth $300/share and is heavily undervalued based on a fundamental analysis" They said, essentially, "We like the stock, if this squeeze works it's going to the moon, buy and hold with me and let's stick it to Melvin Capital, etc."

That's their opinion and they are entitled to it and to share it. And I want you to consider for a moment that the ramifications of the SEC hitting the Little Guy randos on the internet with sanctions for that kind of talk, but not the Big Guys out there naked shorting, telling people the stock is crap, etc, would be huge. Revolutionary, maybe.
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Old 28th January 2021, 12:14 PM   #163
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Originally Posted by lobosrul5 View Post
Driving share prices down certainly effects the viability of a corporation, one thats in trouble anyways. The corp itself will almost always own some shares of itself ("Treasury Shares"), they can sell those if they need to raise capital. The less those shares are worth the less money they will be able to raise. If Gamestop actually has any, or they've sold them off already through desperation, I don't know.
This doesn’t fix the problem of an unprofitable business all it does is send more investment money down the tube.

Someone earlier in the thread suggested that it was wrong to push for liquidation, but in fact if the company has little in the way of business value the sooner that happens the better. Delaying it is just squandering investor/shareholder money.

There are unethical ways to do this (cf what going on with The Hudson's Bay Company) but so far I've seen no evidence of anything along this lines happening with Game Stop
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Old 28th January 2021, 12:17 PM   #164
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Originally Posted by lomiller View Post
Short sellers are anticipating that the price will drop regardless of the impact of their transactions. For them to be guilty of market manipulation you'd they would need to be trying to profit by creating a short term price drop though their selling then closing their position before the price goes back up. That doesn't fit with what's going on here.


If\when GME files for bankruptcy and is liquidated shareholders will get a few pennies per share and that's it. Anyone who paid more than that (aka the would be raiders) will lose money and the people who sold them (aka the hedge funds) will receive that money.

The play for the would be raiders is that they are trying to use liquidity requirements to force the hedge funds to be the ones to sell at very high prices. In that case the raiders who times their exit correctly would make a profit at the expense of the hedge funds and any raiders who don't get out on time.

IMO no matter which way it goes, some or most of these people will end up loosing money even though they have a big "on paper" gain right now. Buying into a bubble under the assumption someone else will pay more later usually isn't a winning strategy.
But who cares? That's capitalism and a free market.
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Old 28th January 2021, 12:20 PM   #165
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Originally Posted by xjx388 View Post
If that's true, how do hedge fund managers short a stock and then go on CNBC and squak about how horrible that stock is?
It's no different than an Analyst who owns a stock saying positive things about that company. As long as there is full disclosure there isn't really anything unethical about it. It's good to take such cases with a grain of salt as an investor, but so long as they own\short the stock because they legitimately believe it's good\bad it's not market manipulation.

In this case there is plenty of reason to think GME is WAY overvalued.
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Old 28th January 2021, 12:21 PM   #166
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Originally Posted by xjx388 View Post
But who cares? That's capitalism and a free market.
A lot of people care now that it's Reddit doing it and not Wall Street, which, I keep bringing up, seems to be the point.

A game that you only want to play when you are winning is a scam.
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Old 28th January 2021, 12:25 PM   #167
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Originally Posted by Cavemonster View Post
Are they trolls in this context though? I can see why this action sort of FEELS like trolling, but i don't think it really fits the definition.
I used that appellation more as a general descriptor as opposed to a condemnation of this particular set of actions.
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Old 28th January 2021, 12:25 PM   #168
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Originally Posted by xjx388 View Post
But who cares? That's capitalism and a free market.
FYI the statute I cited was part of the regulatory response to the causes of the 1929 crash and subsequent Great Depression. Prior to that similar schemes were commonplace and people were routinely robbed using techniques just like this. It's why they were made illegal.
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Old 28th January 2021, 12:30 PM   #169
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Originally Posted by a_unique_person View Post

Reddit punters take on Wall Street. Will this end in tears?

Yes, for some. Champagne and caviar for others. Lots of money will change hands, and when it's all over nothing in the big picture will have changed, but lots of people will have more, or less, money than when they started.
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Old 28th January 2021, 12:32 PM   #170
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Originally Posted by lomiller View Post
This doesn’t fix the problem of an unprofitable business all it does is send more investment money down the tube.

Someone earlier in the thread suggested that it was wrong to push for liquidation, but in fact if the company has little in the way of business value the sooner that happens the better. Delaying it is just squandering investor/shareholder money.


There are unethical ways to do this (cf what going on with The Hudson's Bay Company) but so far I've seen no evidence of anything along this lines happening with Game Stop
Thats a forward looking statement in investment speak. We don't know for 100% that GME was heading towards oblivion. Their executives may turn things around.... unlikely IMO for them. As I said before AMC is a different beast. Short sellers could actually kill a potentially viable business.
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Old 28th January 2021, 12:33 PM   #171
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Originally Posted by TragicMonkey View Post
I always wonder when people win at casinos why they don't remove their original stake and put that back into their pocket, then continue playing with the winnings. That way even if they lose after that they'll end the day no worse off than they were before they started.

But then I realized that someone who thought that practically would probably not be gambling in a casino in the first place, so that's why it doesn't happen much.
I only hit a casino once every several years, and that's the strategy I'd probably play -- if I ever won.

Last time I was there I stopped into the arcade and realized I had a lot more fun playing the pinball machines, and each quarter lasted a lot longer.
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Old 28th January 2021, 12:35 PM   #172
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Originally Posted by lomiller View Post
It's no different than an Analyst who owns a stock saying positive things about that company. As long as there is full disclosure there isn't really anything unethical about it. It's good to take such cases with a grain of salt as an investor, but so long as they own\short the stock because they legitimately believe it's good\bad it's not market manipulation.

In this case there is plenty of reason to think GME is WAY overvalued.
Maybe. But no one is saying, "Buy GME because it's WAY undervalued!" This is quite clearly a short squeeze attempt. Nothing wrong with that at all, and nothing wrong with people getting together on an open public forum and encouraging each other in that endeavor.

The really wrong stuff going on is that the brokerage firms, such as the ironically named "Robinhood," seem to be blatantly manipulating the market by not allowing buys on GME, AMC and others. It certainly looks like collusion with the Big Guys from the outside. I haven't heard a good explanation as to why they are doing that...their excuse is "volatility" but if you can't handle volatitily, why are you a stockbroker?
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Old 28th January 2021, 12:38 PM   #173
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Originally Posted by xjx388 View Post
Maybe. But no one is saying, "Buy GME because it's WAY undervalued!" This is quite clearly a short squeeze attempt. Nothing wrong with that at all, and nothing wrong with people getting together on an open public forum and encouraging each other in that endeavor.

The really wrong stuff going on is that the brokerage firms, such as the ironically named "Robinhood," seem to be blatantly manipulating the market by not allowing buys on GME, AMC and others. It certainly looks like collusion with the Big Guys from the outside. I haven't heard a good explanation as to why they are doing that...their excuse is "volatility" but if you can't handle volatitily, why are you a stockbroker?
From what I heard: Robinhood offers free trades. They make money by allowing big capital groups to see trades a few milliseconds before they are actually executed. Those groups can use that data to make high frequency trades. One of those groups called Citadel just bought a big chunk of Melvin Capital, the group that just lost a bunch of money shorting GME. So it seems they have an interest in keeping Citadel happy, since they are the actual customer of RH, while the traders are not customers per se, more like the product.

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Old 28th January 2021, 12:44 PM   #174
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So how many nested games of "Move the numbers around and make money inbetween the ticks of the clock" are we now.

So Group A (Robinhood and other brokerage firms) has taken its ball and gone home because Group B (Reddit) kept Group C (Bigger traders) from playing a rigged game and winning so Group A can't make money off it.
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Old 28th January 2021, 12:49 PM   #175
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Originally Posted by JoeMorgue View Post
So how many nested games of "Move the numbers around and make money inbetween the ticks of the clock" are we now.

So Group A (Robinhood and other brokerage firms) has taken its ball and gone home because Group B (Reddit) kept Group C (Bigger traders) from playing a rigged game and winning so Group A can't make money off it.
It doesn't matter what layer of finanception we're at, only how many more it'll take to cut Group B out entirely and move things back inside the clubhouse.
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Old 28th January 2021, 12:50 PM   #176
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Originally Posted by lomiller View Post
Short sellers are anticipating that the price will drop regardless of the impact of their transactions. For them to be guilty of market manipulation you'd they would need to be trying to profit by creating a short term price drop though their selling then closing their position before the price goes back up. That doesn't fit with what's going on here.
I disagree. If that were true they wouldn't need to publish who they are shorting and why. They are picking a vulnerable target, making a bet, and then trying to get the rest of the market to validate their bet by selling off their vulnerable target.


Quote:
If\when GME files for bankruptcy and is liquidated shareholders will get a few pennies per share and that's it. Anyone who paid more than that (aka the would be raiders) will lose money and the people who sold them (aka the hedge funds) will receive that money.

The play for the would be raiders is that they are trying to use liquidity requirements to force the hedge funds to be the ones to sell at very high prices. In that case the raiders who times their exit correctly would make a profit at the expense of the hedge funds and any raiders who don't get out on time.

IMO no matter which way it goes, some or most of these people will end up loosing money even though they have a big "on paper" gain right now. Buying into a bubble under the assumption someone else will pay more later usually isn't a winning strategy.
Oh, I agree that most of the redditors will lose money, but they seem to know that and they don't seem to care. No one is misleading them into thinking that GME is actually worth this much money, what they are being told is that screwing over the shorters for billions is worth losing a bit of money.

As I said previously: how much was it worth it to some people that the other party lose in the last election? They put their money into that cause with no expectation of return. This is similar.
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Old 28th January 2021, 12:52 PM   #177
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Originally Posted by JoeMorgue View Post
So how many nested games of "Move the numbers around and make money inbetween the ticks of the clock" are we now.

So Group A (Robinhood and other brokerage firms) has taken its ball and gone home because Group B (Reddit) kept Group C (Bigger traders) from playing a rigged game and winning so Group A can't make money off it.
RH is probably dead meat. They depend on the small scale Millennial and Gen Z traders who are the exact same people frequenting Reddit and other social media, and its going viral to quit them. I hadn't heard of them until maybe 3 years ago when a young co-worker was asking me literally how stocks work because he got this app where he can trade for free. And they gave him 1 share of something for free, forget what.

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Old 28th January 2021, 12:53 PM   #178
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If it takes you 3 paragraphs to explain to me how you made your money, you didn't make it honestly.

If you aren't producing a product, providing a service, or investing directly in actual people who are going to producing a product or provide a service, you're just playing a game with other people's money.

Investing in the concept of investing is inherently stupid.
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Old 28th January 2021, 12:53 PM   #179
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Long-term, the stock is likely to be a dog. This was probably a good year for them; with everybody stuck at home I'd suspect used game sales were up nicely. But games are rapidly shifting to the download model, which means the product is going to disappear. Plus they are getting a lot of competition from the mini-consoles that have come out over the last few years.
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Old 28th January 2021, 12:54 PM   #180
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Originally Posted by lobosrul5 View Post
RH is probably dead meat. They depend on the small scale Millennial and Gen Z traders who are the exact same people frequenting Reddit and other social media. I hadn't heard of them until maybe 3 years ago when a young co-worker was asking me literally how stocks work because he got this app where he can trade for free. And they gave him 1 share of something for free, forget what.
Yes. From their mission page:

Quote:
Robinhood’s mission is to democratize finance for all. We believe that everyone should have access to the financial markets, so we’ve built Robinhood from the ground up to make investing friendly, approachable, and understandable for newcomers and experts alike.
yanking the ability to trade on this stock, seemingly for the benefit of elite brokers, is an unforgivable sin. I imagine most people will look elsewhere for service in the future.
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Old 28th January 2021, 12:57 PM   #181
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Originally Posted by lobosrul5 View Post
Thats a forward looking statement in investment speak. We don't know for 100% that GME was heading towards oblivion. Their executives may turn things around....
Maybe, or maybe they are just wasting more money and hurting more people by keeping the company running. Normally this would get sorted out by the interplay between buyers\sellers and short\long investors.

What these would be raiders are doing plays no part in that and just an attempt to profit at someone else's expense.
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Old 28th January 2021, 01:03 PM   #182
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Originally Posted by xjx388 View Post
Maybe. But no one is saying, "Buy GME because it's WAY undervalued!"
So what? Just because they are not guilty of one crime doesn't mean they are not guilty of something else. They are buying and encouraging others to buy specifically to ramp up the share price. This has been illegal since 1934, and it's been illegal for a reason.
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Old 28th January 2021, 01:03 PM   #183
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Originally Posted by lobosrul5 View Post
RH is probably dead meat.
If the latest rumors are right, they are now. They've started selling their users' Gamestop stock, "for their own good."
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Old 28th January 2021, 01:04 PM   #184
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Originally Posted by lobosrul5 View Post
From what I heard: Robinhood offers free trades.

Everyone has free trades now. That started over a year ago. I thought Robinhood would fade away when the big guys started free trades, since their trading platform is crap (at least, it was then). For some reason it didn't happen.
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Old 28th January 2021, 01:05 PM   #185
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Yeah what little trading I've done, never got into it hardcore but I have a small Motley Fool managed portfolio, was all through my normal bank's standard app.
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Old 28th January 2021, 01:10 PM   #186
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Originally Posted by lomiller View Post
Maybe, or maybe they are just wasting more money and hurting more people by keeping the company running. Normally this would get sorted out by the interplay between buyers\sellers and short\long investors.

What these would be raiders are doing plays no part in that and just an attempt to profit at someone else's expense.
What would be kinda fitting is if GameStop sold off treasury stock at these prices that gave them just enough cash to reorganize with some genius business model and then eventually became valued more than this inflated valuation.


This may have spoiled the underlying plot for Trading Places II: The Revenge of The Dukes.

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Old 28th January 2021, 01:10 PM   #187
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You could have bought and sold today with perfect timing and made 140%. With the worst timing, you'd have lost 73%.

So no, it was not too late.

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Old 28th January 2021, 01:13 PM   #188
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Originally Posted by lobosrul5 View Post
As I said before AMC is a different beast. Short sellers could actually kill a potentially viable business.
I see this stated often without explanation. How does "short selling" kill a viable business?

Generally, stock price has no effect at all on a business unless the business is forced to raise money by selling more shares to survive. And a company that is illiquid or with a negative book value is going to have a hell of a time selling shares at all.

When a company decides to sell shares it does so after assessing that current shareholders will benefit more from the additional liquidity and growth this enables v loss from the dilution of the new shares. Companies that sell shares have to issue a prospectus first hence they tend to be companies with good prospects.
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Old 28th January 2021, 01:15 PM   #189
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Man life is so much easier when you stick to buying and selling things that actually exist.
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Old 28th January 2021, 01:16 PM   #190
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Originally Posted by JoeMorgue View Post
Man life is so much easier when you stick to buying and selling things that actually exist.
My Beannie Baby portfolio is going to take off any day now.
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Old 28th January 2021, 01:18 PM   #191
lobosrul5
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Originally Posted by marting View Post
I see this stated often without explanation. How does "short selling" kill a viable business?

Generally, stock price has no effect at all on a business unless the business is forced to raise money by selling more shares to survive. And a company that is illiquid or with a negative book value is going to have a hell of a time selling shares at all.

When a company decides to sell shares it does so after assessing that current shareholders will benefit more from the additional liquidity and growth this enables v loss from the dilution of the new shares. Companies that sell shares have to issue a prospectus first hence they tend to be companies with good prospects.
You're talking about issuing new shares. Yes, for a company in trouble that's not likely to work. They can sell shares of common stock that they hold, at any time they want on the open market. Even indirectly the ability to do that can help. AMC actually just got a rather large loan, company owned shares could have been seen as collateral.

There is another issue as well when a corps shares get really low, below what their tangible assets are worth. A group can swoop in buy them up then sell everything off to make a quick buck. That, I believe, is what happened to Toys 'r Us.
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Old 28th January 2021, 01:21 PM   #192
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Originally Posted by marting View Post
I see this stated often without explanation. How does "short selling" kill a viable business?

Generally, stock price has no effect at all on a business unless the business is forced to raise money by selling more shares to survive. And a company that is illiquid or with a negative book value is going to have a hell of a time selling shares at all.

When a company decides to sell shares it does so after assessing that current shareholders will benefit more from the additional liquidity and growth this enables v loss from the dilution of the new shares. Companies that sell shares have to issue a prospectus first hence they tend to be companies with good prospects.
Short sellers target companies that are overvalued. Overvalued companies may not have the same difficulty raising money this way.

That said, in the long run keeping an unprofitable business alive by selling shares at inflated prices only to lose that money keeping the business going for a few more years ultimately harms nearly everyone, except maybe the executives collecting a paycheck from the failed business. .
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Old 28th January 2021, 01:23 PM   #193
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Originally Posted by Dr. Keith View Post
My Beannie Baby portfolio is going to take off any day now.
It's amusing to imagine an investor somewhere who was holding GameStop because he actually believed that CD's were poised to come back in a big way now being a multi-millionaire.
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Old 28th January 2021, 01:26 PM   #194
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Originally Posted by Brainster View Post
Long-term, the stock is likely to be a dog.
I just bought ten thousands shares of Lazy Beagle, a thousand of Goofy Pug, and five hundred thousand of Hyperactive Labrador. I shall be a billionaire! because everybody likes dogs.
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Old 28th January 2021, 01:36 PM   #195
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Originally Posted by lomiller View Post
Short sellers target companies that are overvalued. Overvalued companies may not have the same difficulty raising money this way.

That said, in the long run keeping an unprofitable business alive by selling shares at inflated prices only to lose that money keeping the business going for a few more years ultimately harms nearly everyone, except maybe the executives collecting a paycheck from the failed business. .
That was the point of my question. I don't see how short sellers kill viable businesses. But I do see people often state it as some sort of obvious fact. It's certainly not an obvious fact to me.
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Old 28th January 2021, 01:39 PM   #196
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Old 28th January 2021, 01:41 PM   #197
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Originally Posted by marting View Post
I see this stated often without explanation. How does "short selling" kill a viable business?

Generally, stock price has no effect at all on a business unless the business is forced to raise money by selling more shares to survive. And a company that is illiquid or with a negative book value is going to have a hell of a time selling shares at all.

When a company decides to sell shares it does so after assessing that current shareholders will benefit more from the additional liquidity and growth this enables v loss from the dilution of the new shares. Companies that sell shares have to issue a prospectus first hence they tend to be companies with good prospects.
It also impacts the ability of a company to borrow money, which almost every company these days is wholly dependent on. lomiller's optimistic explanations are based on short selling happening in a perfect economic vaccuum, which never happens in reality. Gamestop was shorted for 140% of its shares, literally more than it could possibly be worth at any price, and it was made plain enough that it was being taken down that a guy on reddit figured it out. Any outstanding debts either needed to get called in or defaulted on. It was a simple hit job.

Originally Posted by marting View Post
That was the point of my question. I don't see how short sellers kill viable businesses. But I do see people often state it as some sort of obvious fact. It's certainly not an obvious fact to me.
Imagine I could take out life insurance on some random shmuck, Jerry down the street, in case he gets hit by a truck. It's just between me and the insurance company, right? But then I go on TV and say we're all going in on Jerry life insurance, and a thousand other people also take out the same anti-truck insurance on Jerry with me. How long do you think Jerry's going to be around?

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Old 28th January 2021, 01:42 PM   #198
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Originally Posted by marting View Post
That was the point of my question. I don't see how short sellers kill viable businesses. But I do see people often state it as some sort of obvious fact. It's certainly not an obvious fact to me.
Well Betting on Zero is a documentary on a wallstreet mogul trying to destroy a company with a short position on it.

Of course the company is a pyramid scheme so it makes it even more questionable who is the bad guy there.
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Old 28th January 2021, 01:46 PM   #199
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Originally Posted by lobosrul5 View Post
You're talking about issuing new shares. Yes, for a company in trouble that's not likely to work. They can sell shares of common stock that they hold, at any time they want on the open market.
No they can't.

A company can buy it's own shares on the open market. However, it can't turn around and sell those shares back on the open market without a prospectus for those shares which involves a non-trivial amount of work/money. It can sell shares privately to people/entities that meet eligibility requirements such as accredited investors with a significant discount to the public market price. Those are restricted shares and require either a prospectus to be sold publicly or a waiting period.
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Old 28th January 2021, 01:50 PM   #200
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Originally Posted by lomiller View Post
Short selling doesn't make the bankruptcy come any faster.
This is lie. It can contribute to it.

Originally Posted by lomiller View Post
Short selling gets a stigma because they
..they have strong financial incentive to lie about companies they short and contribute to their fall using all available means.

Originally Posted by lomiller View Post
Short sellers target companies that are overvalued.
Or those that shortseller thinks he can convince everyone it is overvalued, killing viable company (for example, startup in need of money by issuing shares) in process.

It greatly amuses me that you fervently pretend that shortsellers are such innocent creatures. Are you shortseller, perhaps?
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