THE GAMESTOP SAGA: HOW RETAIL CHANGED THE GAME

Say “GameStop” and you will probably get one of these responses:

·        “Isn’t that that company?”

·        “Wasn’t something up with that?”

·        “Oh yeah, that squeeze!”

·        “I heard something about it in the news!”

Welcome to Pump Fiction, where we're diving into the GameStop saga—a story so wild it makes Hollywood look like amateur hour. Picture it: Wall Street's finest suits, placing big bets that a dusty ol' game store is on its last life. But then, in comes an army of retail ‘apes,’ fueled by Reddit threads, memes, and way too much coffee. As someone who has seen it all unfold, I’d love to share the events as it happened and I’m going to do it in true WallStreetBets fashion, but before telling the story from a Redditors POV, here is some background about what happened before the greatest short squeeze in Wall street history:

Before we dive deep into the exciting events on jan 28, 2021, we have to go all the way back to 2014 when Melvin Capital by their own admission took their first short position on GameStop. And in their defense, it was actually not a bad idea at the time: Imagine the world moving on to the world of e-commerce, where anything and everything is bought online; including video games which was the main selling point of GameStop: Selling Video games!

As everyone was moving on to the world of Steam and Epic Games, GameStop still didn’t launch any digital gaming website…. nor did they do anything to change their brick-and-mortar business model, which was never a sustainable way to run a successful business in a changing global environment.

Even while seeing the declining sales and revenue YoY, the famed Big short Dr Michael Burry, through his scion asset capital management bought about 3.3% of the company’s common stock, seeing the potential for turnaround, its already big presence across the US with over 5000 stores and a huge cash reserve. It was a classic textbook value play.

 In 2019, The stock was trading far below its intruistic value at $4 per share with a market cap of just $300Million. The funny thing was that they had over $480 million cash in hand through which they could have bought the company 1 and a half times over. Dr Burry sent a letter to the Board of Directors emphasizing the lack of faith in the board to manage the company and urged the company to do a share repurchasing as soon as possible. He also pointed out the massive short interest in the shares (about 60% of the company was shorted at that point) and indirectly pointed out a potential for a massive short squeeze if the company did a buy back for around $230 million and subsequently locking around 80% of the total float. But the board of directors rejected Burry’s suggestion without giving any satisfactory explanation.

AND THEN COVID HIT….

You know what’s worse for a brick-and-mortar company than a failing business model? A global pandemic! As if being at an all-time low at just $3 per share wasn’t enough, a once in a lifetime pandemic hit the globe closing nearly every physical store in the world. And BOOM just like that GameStop didn’t have any revenue at all and the shares plummeted and hit all-time low’s one after another and reached rock bottom at just 64 cents a share ($0.64) at a market cap of just $118 million.

Just when everyone thought that the music was about to stop and GameStop was going to go bankrupt, some bizarre things were brewing in the most unlikely place: Reddit, WallStreetBets to be more specific.

ENTER ROARING KITTY,a.k.a, Keith Gill,a.k.a, DeepFuckingValue

WallStreetBets—OH BOY where do I even begin? Imagine, if you will, the chaotic energy of 4chan mixed with the high-stakes world of wall street. That’s WSB: a wild and reckless Reddit community where self-proclaimed “degenerates” gather swapping hot tips on this week’s sketchiest option plays.

Here, you’ll find people taking outlandish positions, like going all-in on a $250,000 mortgage loan to buy a zero-day-to-expiration (0DTE) option predicting that Nvidia will jump 30% before the close. That’s WallStreetBets in a nutshell. For one person, it could mean hitting the jackpot and cashing in for a Lambo; for the rest, it might mean a fast track to the Wendy’s dumpster. It’s high risk, high reward, and all done in the name of fun. Because, hey, why not gamble big if you're going to gamble at all? And tbf its not gambling if you know you’re going to win.

A YOLO in WSB slang refers to You Only Live Once; A trading strategy where an investor takes a huge risk bet on a highly volatile or risky shares. You should take bold, aggressive actions because life is short. It is a financial slang for GO BIG OR GO HOME.

An 0DTE or a 0 Days to Expire option is a very short-term option play which expires on the same day.

In a subreddit full of self-proclaimed “degenerates”, along strolls a rational investor with an actual investment thesis. But what happens when one sane person shows up to the madhouse? They boo him out of course.      

Keith Gill with his alias DeepFuckingValue or DFV as he is known in the WallStreetBets community posted his $GME position for the first time on September 9th 2019. His investment thesis was simple: He believed that the market had severely undervalued the company and believed in a potential turn around for the company in the upcoming years. He was also inspired by Dr Burry’s stake and advocacy for share buy backs a potential sign for financial restructuring and the high short interest in the company. Although his thesis might sound like a risky value play to a normal person, let’s just say that WSB was not kind to Gill at first to say the least. The idea of putting your entire life savings into a dying brick and mortar company sounded insane to even the most regarded risk takers.

Gill had also started a YouTube channel a few months prior in June under the name of “Roaring Kitty” where he often did livestreams to his 2 or 3 viewers explaining his investment thesis, about how the upcoming console cycle from Sony and Microsoft could potentially give the company short term boost, GameStop’s large pile of cash reserves and low debt all made Gills overview of the company pretty bullish. Unlike WSBs short term option plays, Gills overview of the company was purely fundamental and he believed in the long-term potential of the company.

Gills initial investment was around $50,000 including LEAPS call options (An option expiring after more than one year is called as a LEAP). When covid hit then the shares tumbled to another all-time lows (Gill was down 80% and was down $40k) and most of WALLSTREETBETS was asking gill to take the L and move on, Gill stood on his thesis and saw this as an opportunity to acquire more shares at a discounted price. And so he doubled down… Yeah that’s right, at a time when everyone thought that the world was going to end and markets were at an all-time low, Gill doubled down on his investment in a dying brick and mortar company with no real plans to turn the company around.  Gill kept on buying the shares and by July of 2020 he owned about $150k worth of GameStop.

ENTER RYAN COHEN

In the month of August 2020, Ryan Cohen the Billionaire famed for his involvement in the success of Chewy ltd started buying the shares of GameStop, which started to increase the share price. By September 2020 he had acquired around a 13% stake in GameStop which send a ripple around the investment community. Investors found the involvement of the billionaire very interesting and started to look into GameStop. Up until then people used to bash Gill for buying a dead company ona daily basis, but the involvement of the chewy founder made them really curious to say the least.

The buying pressure of RC Ventures ltd and the involvement of Ryan Cohen gave the people a profound confidence in GME and the negative narrative around GameStop was shifting to a pretty positive one, especially considering the very low prices. By September end GameStop was up 400% to $20 a share and Gills portfolio was up $800,000.  

The retail interest pretty much picked up from there especially seeing the high short interest. The prices of GME started to climb steadily and by October 2020 Gill would become a multi millionaire at a net worth of $2.2 million.

During November the stock was trading pretty flat and nothing significant was going on… but as December approached Gills Investment became the hottest topic in the WSB community with 1.2 million members. As the investors dived deep into it they found out an alarming thing: OVER 140% OF GAMESTOPS FLOAT WAS SHORTED. Yeah, you heard that right; more shares than it existed was sold short.

But how can you sell more shares of a company than it exists? The secret ingredient is crime. 

But before getting into all that, I know you’re thinking…. short selling? What the fuck is that? What are you even talking about?

Let me explain:

Short selling is the practice of selling a share you borrowed from someone and promising to pay them back on a future date.

Lets take the case with an example:

Imagine that you own an iPhone 16 worth $1000. Now the new iPhone is probably going to come out next month and you’re speculating that the price of the old iPhone is going to go down after the launch. So you go to a pawn shop and sell them the iPhone for the current market value, i.e. $1000 and you promise to buy them back at the end of the next month at the market price. Now you’ve $1000 in hand and a future obligation to buy back your phone.

Imagine that by the end of the next month the iPhone 17 is launched and the price of the older version goes down to $600. You go back to the pawn shop and buy the phone back for $600 as promised. Now you’ve your iPhone and $400 in hand. This is exactly how short selling works.

The bear borrows the share from an owner and promises to return the share at a future date. He outright sells the share and has to buy it back to return it. In return for loaning out the share the borrower has to pay the lender interest for the period for he borrowed the stock known as ‘short interest’.

Let’s say he sold the share for $100 and he buys it back later for $80. Here $20 - $2(short interest) = $18 is the profit for the bear.

Now Imagine that the bears thesis was wrong and the stock went up to $150 or $1000 or $1,000,000 per share. He’d still be obligated to buy back the shares at that price. While his profit is limited to 100% (ie, the stock hits zero), his theoretical losses could be unlimited.

A short seller is a guaranteed future buyer.

Now coming back to our regarded little investors:

Remember how I said earlier that a short sellers losses could be unlimited in theory….? Well the regards in WallStreetBets had a funny idea…. well we know that over 100% of the float is shorted…what if…. all of us come together and buy the entire float.. and put theory into practical? What happens when demand is Infinite but supply is 0? The answer: Infinite rise in price.

The idea was that if WSB came together and owned all the shares, they could lock the float and the short sellers would have to buy it back at the price WSB deems it to be. We set the price and they’re gonna buy it…Be it $10,000 per share…or $100,000…or $10,000,0000 or even a freaking Billion dollars per share. If the float is locked and they're legally obligated to cover, then the stock would go up and up till infinity, thus causing the largest short squeeze in the history of stock markets; and they even gave it a term: Mother Of All Short Squeezes.

The discussion about this insane idea was the hottest topic to be discussed in WSB day after day, and the best part is that the hedge funds and other big shorts had no clue that any of these discussions were taking place…. Because they didn’t believe that the little guy had any power to individually influence the prices of shares and hence didn’t monitor the retail sentiments up till then.

But what they didn’t think about is that what if all the little guys come together? What if they all shared their combined purchasing power on a single ticker just to say fuck you? Well, that’s exactly what happened.

Mother Of All Short Squeezes (MOASS)

As December approached, the idea of a short squeeze was really blowing up and the whole subreddit was excited about the prospect of making a fuck load of money. The number of users in WSB also started to increase tremendously around this time and users were spamming rocket emojis saying WE’RE GOING TO THE MOON.

DFV’s Youtube channel also exploded because of WSB and he went from having 2 or 3 live viewers to having hundreds of consecutive live viewers.

The hype around a potential short squeeze was massive and there were people betting on GameStop short term call options and shares with the money they saved up for college, student loans that were meant to be paid to the college or the mortgage they took out to buy a house. Pretty retarded shit.

The price also started to increase gradually and GME closed at $18.80 at the year-end on Dec 31 2020.

In the first trading week of January, GME opened at $19 on Monday and close at around $17 by Friday.

On January 11, news broke out that the Billionaire Investor Ryan Cohen who previously purchased a 13% stake in the company officially joined the Board of Directors and a potential turnaround and restructuring for GameStop created a really massive amount of hype which turned out to be the ignition for the rocket.

The next day(Jan 13) the stock rallied more than 90% closing at $31.40. At this point Keith Gill was a multi-millionaire with a net worth of 8-10 million dollars, a life changing money for an average person but Keith still didn’t sell.

The sudden surge in GME stock created fomo (Fear of Missing Out) in wsb which caused the stock to rally again the next day  causing the stock going up to $39.

This insane surge created further fomo and WallStreetBets was getting attention from major news outlets which caused the popularity of wsb to explode and they were gaining millions of members. The hype and fomo was getting surreal which further

increased the share price.

By January 20 the stock was trading around $43.This is where things get interesting.

The people in WallStreetBets aren’t exactly known for value investing or buying and selling shares for that matter. After all its called wallstreet ‘bets’ and not wallstreet ‘value investing’. Buying far out of the money option contracts which expires in 2 days is more like it.

In true WSB fashion, they began gambling on which date gme is going to explode (or going to the moon as they’d call it). Most of them started buying cheap far OTM contracts in bulk which led the open interest in option contracts to surge exponentially. When OI surges so does Implied Volatility(IV).

Huge increase in IV means that the market expects the stock to go up really soon. The market makers who sell these options hedge against the possibility of incurring losses due to the surge in prices, by buying shares at the same time to mitigate the risk. This process of hedging to stay Delta Neutral (No profit nor loss) is called as delta hedging.

When the number of open contracts explode exponentially, the market maker is obligated to hedge against the risk of the underlying ending ITM by buying large number of shares. What happens when large number of shares are bought? The price increases. And what happens when the price increases? More calls end up ITM. What does the MM do when more calls end up ITM and the volatility is extremely high? They end up buying even more shares.

This chain of buying shares to hedge against market volatility continues as shares keep ending in ITM. This results in huge increase in price of the stock as the MM won’t stop hedging until either most of the options are ITM or expiration of options. This chain reaction of MM hedging its option positions against market volatility by buying large amounts of shares is called as a ‘Gamma Squeeze’.

In financial terms, as the stock price rises, the delta of the call options also increases (delta measures how much the option's price will change relative to a $1 change in the stock's price), meaning the market makers need to buy even more of the stock to stay hedged. The gamma, which measures the rate of change of delta also starts to increase as the stock becomes more volatile, accelerating the need for additional hedging by buying even more shares, thus increasing the price rapidly. This results in a feedback loop, driving the price of the stock higher and higher during a period of immense volatility.

During the week leading to Jan 28, there were over 10 million contracts open in the option chain. Yeah, you heard that right, a share with a float of just 70 million shares had over a Billion shares worth of contracts betting on it. Pretty insane stuff, right? This was a situation where there was 15 times more contracts where betting on the price of shares than the number of shares actually existed.

 What happens when an insane amount of OTM contracts which wasn’t hedged is combined with insane volatility? The answer Is January 28th 2021.

 The rapid price movements driven by both retail and institutional investors (yes, some long institutions also joined the party around this time. Better late than never ig) triggered a huge gamma squeeze, as MMs short on calls were scrambling to buy shares as prices increased.  

At the close on Jan 20, the price of $GME was around $20. But thanks to all the hype and FOMO on WSB, retail and institutional participants started to ramp up shares and short-term calls. Some delta hedging combined with huge buying pressure made the stock soar and it closed around $43 on Jan 22(up over a 100% in 2 days).

As the share price increased like crazy, so did the craziness of WSB. The retards in there started to gamble and went all in (or YOLO as they’d put it) with their hard earned 401ks, mortgage debt, student debt (literally gambled the money they owed to the bank lol. Truly regarded) into weeklies or 0dte options.

The beauty about 0dte or weeklies is that since the expiry is very short term the MMs would have to hedge it more aggressively, as to remain Delta Neutral. For longer dated options they can be a little lenient as there is a lot of time for the expiry of the option and the stock may very well go OTM as time passes by. So, the risk involved there is lower compared to short term ones which will very likely expire ITM.

Most rational investors buy far dated calls in order to minimise risk. But when a large group of rich ass irrational investors come together, beautiful things happen.

As there were over a Billion shares worth of contracts open and most of them were to expire in the short term and the price started to increase exponentially, the MMs had to buy a lot of shares to remain Delta Neutral. This immense hedging led to a huge gamma squeeze. The share which was trading at $20 on Jan 20 was now trading at $77 on Jan 25.

As if this wasn’t crazy enough, the Big shorts who had immense bet against GameStop started to feel the heat around this time and the smaller hedge funds started to get margin called and they started to cover their short positions adding fuel to the fire.

Now this thing was blown so out of the proportion that this was the main topic of discussion among the major news channels In the US, thus increasing the popularity of WSB Immensely. WSB went from 1 million subs to over 10 million in a span of 2 days.

The hype around the squeeze too started to go way out of hand and anyone and everyone who heard about it in and out of Reddit was pouring money into it.

 GAMESTONK: When things couldn’t get any crazier, the billionaire edge lord Elon Musk tweeted about the WSB which made its popularity sky rocket and it sent a ripple among the markets.

On January 26th the share gained another 100% and closed at $149.98 thanks to the immense popularity and delta hedging. Around this time the big shorts Melvin Capital, Point 72 Asset management (major investor in Melvin), citron research owned led by Andrew left and some other small funds got margin called and they started covering their exposure which sent GME literally to the MOON 🚀 🚀 🚀 🚀 🚀 🚀.

On January 27th the price skyrocketed to close at $347.51, gaining over 140% on a single day. The options chain and the gamma exposure were exploding during this time. Combine that with the short covering and you get an insane price action.

On January 28th GameStop was up $540 in pre-market and WSB was going crazy around this time. It looked like the shorts were covering inside a huge gamma ramp and it looked like the stock was going to explode to the fucking stratosphere. The market opened and the stock kept going up and up……Keith Gills $50,000 investment was now worth $50 million. Then stock hit an all-time high of $483 and suddenly the momentum reduced…..and then the stock stopped climbing and started coming down….

Panic spread around as the stock kept crashing and crashing….and no one knew why it was going down… the entire setup was perfect, there was nothing in theory that could’ve stopped the short squeeze. Remember when I said the secret ingredient is crime?

CAN’T STOP WON’T STOP, BUT THE GAME STOPPED…..

                                                                       ROBIN HOOD TURNED OFF THE BUY BUTTON

RobinHood, one of the largest brokers in the United States Turned off the buy button for GameStop stock…. which caused the buying pressure to slow down and eventually crashed the stock….

There was massive unrest on WallStreetBets calling market manipulation and how the game was rigged against the little guys. The days that followed was a total shit show where the stock went up and down in extremely volatile conditions….but RobinHoods action killed all the momentum and no major shorts were squeezed.

Robinhood stated that the decision to halt buying was related to the capital requirements from its clearinghouse, The Depository Trust & Clearing Corporation (DTCC). The DTCC sets requirements for how much collateral a brokerage needs to maintain to settle trades. When the price of GameStop surged, Robinhood's clearinghouse required $3 billion in collateral, a significant increase from what was needed before.

But why did one of the largest stock brokers in the US not have enough capital to handle a volatile stock and got margin called? The answer lies in PFOF.

What is Payment for Order Flow (PFOF)

Remember how I said RobinHood allowed commission free trading? But if a broker doesn’t charge brokerage for your trades, how do they make money?

RobinHood revolutionized the market in 2016 when it launched its own commission free trading app. Up until then retail investors had to pay around $20 for a single trade. RH exploded significantly as retail participation started to increase tremendously due to the free trading it offers.

RHs trading model is known as Payment For Order Flow or PFOF. In this model the broker reroutes the shares to market makers to get the shares executed. They don’t execute it directly in the market. They get a fixed % commission from the mms instead in exchange.

·  Market makers make money from the spread between the price at which they buy a security (the bid) and the price at which they sell it (the ask).

·  When a retail investor places an order (e.g., buying a stock), the market maker may purchase that stock at a lower price than the retail investor pays, profiting from the difference.

·  Even though the retail investor may be paying a slightly higher price than the market maker bought the stock for, this small difference accumulates into substantial profits for the market maker, especially if the volume of trades is high.

Even though the brokerage is not charged to the retail directly, the market maker sells the security to the investor at a premium. The broker gets a commission for the mm and the mm profits from the bid ask spread. The consumer pays less than what they’d have paid for brokerage and the brokerage still gets commission. Win win right? Well not exactly. Let me explain.

While the market makers execute the trades, they do that in their own name. While technically you own the shares and can buy or sell the shares at anytime, it is not the same as being a direct shareholder of the company. The market maker or broker registers the shares under a street name,like their own name, and the broker holds the share under your name.

In a perfect world all of this wouldn’t have mattered, but lets just say that Wall street is far from perfect.

What market makers typically do is that they’d lend out these shares that they own in their name to people wanting to borrow the shares. The real owner of the shares would have no idea about it.

The market maker for RH, Citadel Securities has a subsidiary hedge fund called Citadel LLC which had a major stake in Melvin Capital along with Point 72. Citadel used to lend out the shares to Melvin Capital with its market making capabilities.

Now imagine this hypothetical scenario where Citadel lends out 10 million shares to Melvin who lends out those shares to Point 72 Asset management who lends it to Citron research. Now imagine all these participants taking a short position before lending. And BOOM now there are 40 million shares sold short with the original 10 million. Here the exposure of Citadel is 4x than it’d have been to short the shares themselves as if one of the dominos falls everyone falls. This process Is called as “Naked Short Selling”.

Here the real shares which has been sold short is only 10 million. But since all the participants expect the price to go down, they all sell short from the same pool of borrowed shares, which might significantly increase the short interest. Since this practise can be used to artificially deflate the price of the shares and doing so be deemed market manipulation this trading practise is not legal in the United States. Not that it stops Wall street from doing so.

What happened with GameStop was something similar. Citadel who routed the shares to Melvin Capital naked short sold the shares….and here is the horrifying beauty of naked short selling…there is no limit to how many shares you can short. Sure, your exposure to the risk of losing money might be Insanely high.. buy hey if I’m illegally tryna drown a company to death with market manipulating practises, I’d be pretty sure that I’d win. And they almost did.. BlockBuster, Toys R us are some examples of companies which were cellar boxed to death by greedy short sellers.

Not only did they sold short the shares of gme they also short sold entire etfs that contained gme too. Hence when some of the shorts squeezed stocks like AMC and KOSS too saw rapid increase in prices.

The data which followed the trading events of January points out to the fact that over a billion shares of GameStop stock were sold short with a short interest of over 700%. Pretty insane stuff right?    

It was also reported that at a point $GME had a negative beta of -8.

Negative beta refers to a stock's tendency to move in the opposite direction of the broader market. While most stocks have a positive beta (moving with the market), a negative beta indicates that the stock moves counter to market trends. This is extremely rare, as most stocks are influenced by the same economic factors that affect the market. Assets like gold and certain hedge funds might show negative beta, but sustained negative beta for individual stocks is uncommon, let alone -8. It meant that each time the market went up or down 1%, $GME would go in the opposite direction 8%. This level of volatility from negative beta is unheard of.     

Considering the level of shares sold short, the absurd short interest, turning off the buy button as the little guy was about to win all points out to one obvious factor: Market Manipulation in broad daylight. And there was nothing the regulatory agencies were doing about it. I mean they did give some small fines like always but that Is just a slap in the wrist. If you’re making a billion dollars and get fined 50 million for it, the 50 million can might as well be considered as an operating expense.

The stuff about GameStop broke the internet... it was everywhere… In the news, social media, radio..Billboards or even in the sky.

There were many class action lawsuits filed against RobinHood, but all turned out to be a nothing burger.

The discussion about the saga was the hot topic in television for a long time where many celebrities and hedge fund managers debated about the fairness of the markets.

The Billionaire investor and shark tank fame mark Cuban did an AMA in WallStreetBets where he discussed how Robinhood's liquidity issues led to trading restrictions, advising users to switch to brokers with greater financial backing to avoid similar problems in the future. He emphasized the power of WSB and similar communities and the potential for future trading disruptions due to the group’s coordinated efforts. Although Cuban was realistic about the limitations of legal action against brokers like Robinhood, he expressed his support for the grassroots pushback against Wall Street norms, suggesting this movement could lead to lasting change in the financial industry.

Since the events of discussion blew out of proportion the United States Congress held a special Congress hearing committee where all the major participants in the saga took part in including Ken Griffin the chairman of citadel, gave plotkin of Melvin capital and steven cohen of point 72. Keith Gill also took part in the historical session to testify representing retail.

After the events of January, Keith Gill took a step down from the public spotlight. Not much was known about him until 3 years later in may 2024 he’d post an update. The stock which was pretty much dead the last couple of years started to bounce back hearing Gills potential return.

Gill posted a new YOLO update in r/SuperStonk in which he held positions of about $220 million. Yeah you heard that right, the guy who didn’t sell for 40 million was suddenly back with $220 million positions in hand when the stock was at a 3 year low.

This re-ignited the flames for retail and the stock soared the following days. 3 days later he’d make his first public appearance in his YouTube channel in which he had around 700k live viewers. He emphasized on what all has happened and said he only came back just to give an update about his life. Nonetheless the stock soared from $7 a share to over $83 in the following days. DFV even became a billionaire at one point…. Just imagine putting $50,000 into a stock and being a billionaire in a couple of years. Keith Gill still didn’t sell despite having the potential to acquire generational wealth. He is probably the only retail investor in history to acquire such enormous wealth in such short time span.

It died down when GameStop announced a share offering, but that just solidified the long-term implications of GameStop as it raised around 2.5 billion cash and had 4.5 billion in cash atm. Such high amount of cash reserves and a potential turn around which is in progress under the guidance of Ryan Cohen likely means that GameStop is here to stay for the meantime.

Although no major regulatory action was taken against the predatory short sellers, GameStop did change the way that Wall street tried to understand market sentiments.

It highlighted the growing power of social media communities like Reddit’s r/WallStreetBets in influencing stock prices. Retail investors, who historically lacked the power to counter institutional players, were able to leverage collective action to challenge hedge funds that had heavily shorted the stock. This demonstrated to Wall Street that market sentiment was no longer confined to traditional financial analysts or institutional research—it was now shaped by crowdsourced ideas shared openly across social media platforms.

This resulted in Wall Street closely monitoring the popular social media platforms to understand retail sentiment. The term ‘’meme stocks’’ too was coined as a result in order to show that retail rallied stocks was purely based upon dumb investment thesis for which they bought the stock without any proper research and that they traded purely on emotions. It was to build a narrative that only Wall street could do what Wall street does best. And it kinda worked.

 This also resulted in a lot of pump and dump schemes where bots would spam specific tickers in some subreddits. They’ll try to create artificial hype with the help of bots and try to get retail fomo. Once retail takes the bait and pumps the stock, they’ll sell the stock and retail will be left holding the bags.

Algorithm trading which is gaining significant popularity in recent times also considers retail sentiment while analysing a stock by scanning these communities.

The unique thing about the GameStop situation is that it got wall street off the guard, and they had to cheat just to make sure they survive. There likely won’t ever be a GameStop situation again as Michael Burry has said. Speaking off Burry he sold early during the December run up (made a nice 400% return) as he is a value investor and thought that the retail participation took the prospect of value investing away from it. He did make significant gains, even though he’d have made 15x more if he didn’t sell during the squeeze.

If he didn’t sell his GME stake back then then he’d have made over a billion dollars in profit. But opportunity missed. Bro really missed the opportunity to make a sequel to The Big Short: The big Long and repent his sins as a short seller during the 2008 financial crisis.

Although the SEC received numerous backlashes to make PFOF, dark pools etc more transparent, they ultimately didn’t do shit.

Thank you so much for reading my blog if you made it so far. I hope you understood about what happened during the trading events of January and understood the need for bringing reforms to Wall street  in order to promote more transparency. I tried my best to cover this topic on the pov of a person who has gone through the entire journey and I hope it gave you a different perspective of what happened during those uncertain times. I couldn’t have understood any of this shit if not for the SuperStonk library and some of the brilliant people in that sub who has taught me how the market works and everything wrong with it. Huge shout out to u/gherkinit without whose daily DD I remotely wouldn’t have been able to comprehend any of this. Again, I thank you for reading so far and I hope you learned something new.

                                                                      Until next time

                                                                                                  Jayakrishnan