“Game Station” ($GME) stock rose sharply, at $351 per share.
The news came suddenly, lighting up Nina Carr’s mobile phone screen and setting off stormy waves in her heart. She is not a professional investor. She lives in San Antonio, 3,000 kilometers away from the Taurus statue on Wall Street; but her son, Jayden Carr, who is only 10 years old and in the fifth grade of elementary school, is ” Shareholders of “Game Station”.
There are not many shares, only 10 shares. More than a year ago, in order to teach Jayden financial management, Nina bought these 10 shares of “Game Station” for him, at only $6.19 per share.
This is a casual deal, and Nina does not expect this investment to bring much wealth to the family: it is true that Game Station, as the largest electronic game chain physical retail store in the United States, can be called the spiritual home of many American game enthusiasts. In the 30-year-old generation of young adults, how many people have been shopping here since they were young. Whenever there is a new console or new game, they are eager to come here for a few moments, and then calculate the pocket money in their pockets. How long can I save a fortune here? However, the white clouds, the changing times, the development of e-commerce and logistics industry squeeze the living space of physical stores. The popularity of digital games allows players to directly purchase and download on the console with one-click installation. Various factors are superimposed, making the game station like the West The king of Chu came under the wall, and the soldiers ate up, and he was embarrassed on all sides.
The investment veterans are all right, but Nina and Jayden don’t care. Nina bought these 10 shares as a gift to her son. It was meant to be more educational than investment. She wanted Jayden to learn to read financial reports, read graphs and tables, and manage her own money more rationally. After all, Jayden’s father died young, and the mother and son are living together, financial management is too important for this family. As for Jayden, his reason for holding these shares is even simpler. As a game fan, Game Station was originally his favorite company. After purchasing these 10 shares, he will receive a proxy vote from Game Station every year, which gives him a sense of protagonist, even if he is just a lot of protagonists. One of the trivial ones.
Such a small shareholder is like a breeze above the vast ocean, no matter whether he goes east or west, he can’t control the direction of foreign fashion. The sea is so great that only the big suits who live on the height of Wall Street’s temples, tens of billions of dollars are playing cards while talking and laughing, like the power of Kunpeng, can stir up storms.
Until January 27, 2021, a new era swept across.
Take the lead DFV
If Wall Street is a temple, retail investors are rangers. In the long history of the past, the ranger walked alone. In this world, there is no martial arts covenant, and there is no Huashan swordsmanship. If there are rivers and lakes, these rivers and lakes are just a mass of scattered sand. Later, with radio and television, with the Internet, some people preached to solve puzzles, and some established sects. Starting from the second decade of the 21st century, with the development of social networks, rangers have more and more gatherings. It allows them to exchange experiences and exchange information.
In the view of DFV, Game Station is such a stock that can dig deep value: Although the fundamentals are not good, Game Station still has so many physical stores in the United States, and those stores are all real. assets.
There are also feelings, how many people’s spiritual homeland is entrusted with how many people’s childhood memories, how could it be worth such a small amount of money?
Reddit is one of the meeting places. Reddit is actually an all-encompassing large-scale forum, from astronomy, geography, and national events to the boring reverie of showering and bathing. As long as anyone is interested, they can set up a special forum for discussion, attracting a group of people who are also interested to talk about the mountains. Its unique recognition system allows everyone who watches the forum to vote on topics and replies, or like or dislike them. Finally, posts and replies with a high recognition index can float on the top, and everyone will be on the top as soon as they enter the special page. can see. Some valuable opinions can also receive “reward” paid in Bitcoin. All in all, the quagmire is here with strength. You must have real talents and learn the real ability, that is, you will follow the crowd with your arms and become the leader of these people who have no school and no affiliation.
In the more than one month from 2020 to 2021, DFV is the leader of the “Wall Street Bets” special edition in reddit.
The full name of DFV in reddit is DeepFxxkingValue, which means “depth value” except for the swear word. This term is meaningful in financial investment. Broadly speaking, it is a deep value investment strategy derived from the “Godfather of Wall Street” Benjamin Graham. In a narrow sense, it can be understood as the safety margin of the stock price relative to the company’s intrinsic value. Big. In layman’s terms, if a company should have a market value of 3 billion, but because the stock plummeted, its market value is now only 2 billion, then its “depth value” is very high.
In the view of DFV, Game Station is such a stock that can dig deep value: Although the fundamentals are not good, Game Station still has so many physical stores in the United States, and those stores are all real. assets. There are also feelings, how many people’s spiritual homeland is entrusted with how many people’s childhood memories, how could it be worth such a small amount of money? Moreover, Sony will release the PlayStation 5 within one or two years, which is big news for the game world. He believes that the financial world underestimates the power that the new console will bring to the game station. So, he started investing in Game Station in June 2019, when the stock price was only $5, and he invested a total of $53,000.
He posted a screenshot of this investment on “Betting on Wall Street,” and it basically failed to arouse any response. He found that Michael Barry, the protagonist of the movie “Big Short”, was also optimistic about the game station. He immediately quoted Barry’s judgment in the post, but still no one recognized it. In the post, only a few people laughed at him and said that this kind of junk stocks is necessary for investment. A netizen named “cmcewen” issued a sincere sigh: “He should dump these stocks immediately.”
However, DFV did not sell off, but continued to cover positions. “People think I must be crazy,” he wrote in a reply at the end of 2019, “and I think other talents are fools.” By 2020, he frequently tweeted under the name “Roaring Cat” Update on the investment situation and analysis of the game station. At the same time, he also made videos and played them on YouTube and TikTok. He often does live broadcasts to explain his investment ideas. He admitted that he is likely to be a lone traveler on this road. In an early video, he ridiculed himself: “Maybe there will not be a few living people seeing this in the end, so I feel a little bit of myself now. silly.”
He often wears a baseball cap, with slightly longer hair tails arranging edges randomly under the cap, and a cat wearing sunglasses is printed on the T-shirt he wears most often. He said that his daughter is still very young. In order to avoid disturbing her to sleep at night, he works at his “secret base”. DFV calls this place a “cat corner”. As you can see in the video, there is a hanging on the door handle. Cat plush toy. He usually speaks quickly, always interpreting and analyzing stock trends while drinking beer, interspersed with various popular online jokes. To put it simply, DFV looks like a standard ranger who is mingled with reddit. Slowly, he gained some fans, and the Ackilles and Bowlerguys92 in the special edition of “Bet on Wall Street” began to follow in his footsteps and put money into the stocks of the game station.
As DFV’s position became public and the floating profit of tens of millions of dollars was fully exposed by the media, Wall Street began to whisper. Hedge funds suspect that DFV is not an extraordinary person, but an agent of other competitors. The reason for this concern is also because, in the history of American hedge funds, this is a tacit operation: when a giant shark is about to die, it is often its peers who ate it crazily. The malicious act of forcing positions from peers is well known in the collapse of long-term capital companies, and it is also notorious in the 2007 subprime mortgage crisis. At that time, a large number of funds led by Melvin were actively shorting and were suffering from the pain of replenishing the amount of margin every day.
The weakness of hedge funds
Melvin Capital is not a vegetarian.
The founder, Geb Plotkin, graduated from Northwestern University in 2001 with a major in economics, and since then worked in several hedge funds. Before founding Melvin Capital, he managed a fund at SAC Capital, where most of his investment targets were consumer stocks. SAC boss Steve Cohen believes that Plotkin is one of the best traders he has ever worked with, so when the latter decided to leave SAC in 2014, Cohen became one of the first investors of Melvin Capital. One. Thanks to Cohen’s help, Melvin Capital’s start was much smoother than that of ordinary hedge funds. Plotkin has enough leeway to accept funds and invest according to his own style and preferences.
Plotkin is not a man without a story. When acquaintances on Wall Street mentioned him, they would say that he is a low-key but aggressive trader, and was once accused by the US Securities and Exchange Commission of using insider information to trade. He usually has more bullish positions and heavier bets when he is long, but when he finds out which stocks are problematic, he will be mercilessly short. How big can his handwriting be? Of the five largest short positions in the European market last month, two belonged to Melvin Capital.
In Plotkin’s view, the game station’s stock is the kind that he would be mercilessly short. He firmly believes that the era of physical games has passed, and downloading digital versions on the Internet has become the new mainstream. The wheel of history is unstoppable. Sooner or later, physical chain stores like Game Post will become the tears of the times. Therefore, since the beginning of Melvin’s establishment in 2014, he has continued to short the game station. By 2020, when the new crown epidemic spreads and people are getting used to working at home, playing at home, and shopping online at home, and truly reaching the world without closing their homes, Plotkin has stepped up its efforts to short game stations. As of August 2020, Melvin already holds put options on 3.4 million shares of Game Station stock, which will rise in value as Game Station’s share price declines.
On the issue of the game station, Plotkin has many fellows on Wall Street. It’s not surprising that Game Station’s performance has been sluggish for several consecutive years: in the 2019 Christmas season, their sales fell by 30% year-on-year; in the first quarter of 2020, net sales were lower than expected by $70 million, excluding the first quarter due to health incidents. In closed stores, total global same-store sales fell by 17% year-on-year. After accounting for the impact of the closure of entry stores, global same-store sales fell by approximately 30% year-on-year. Wall Street analysts generally downgraded the rating of Game Station to “sell”. As for those hedge funds, according to IHS Markit data, in the first half of last year, the stocks borrowed to support these short positions accounted for 50% to 100% of the company’s total stock, and the company’s stock price was between US$3 and US$6 per share. Between fluctuations.
The bears are like this. They are like tiger sharks that smell blood. Once they track down and bit the target, they won’t give up easily. Melvin has tasted the sweet bloody taste of the game station, and must get enough rewards.
However, when the mantis hunted the cicada and the oriole, when Melvin Capital was shorting the game station, the eyes in the dark were already on them.
According to regulations, Melvin Capital must submit a 13F report every quarter. The 13F quarterly report, also known as 13Filings or SEC Form 13F, whether it is a mutual fund, hedge fund, trust company, pension fund or insurance company, as long as the equity assets under management exceed US$100 million, it must be in each quarter (three months) Within 45 days after closing, disclose to the US Securities and Exchange Commission (SEC) the US equity held by its institution and provide the destination of the relevant funds.
13F only requires funds to disclose their long positions. If they want to protect their holdings, some funds will also apply to the SEC to conceal part of their holdings. In other words, the fact that Melvin Capital is shorting the game station shouldn’t have to be exposed. However, this tiger shark cruising across the ocean to hunt has a flaw here. Because they not only short the game station directly, but also bought put options on the game station stock, in this way, they must disclose this position.
At the time, this was not a flaw at all. You should know that short-selling through put options has lower risk than traditional short-selling. Simply put, if you buy a put option on a stock, your biggest loss is the premium you paid for the option. This loss is limited; and if you go short directly, your loss may be unlimited. Moreover, Melvin’s 13F report submitted on August 14 last year showed that they had at least 91 positions as of the end of the second quarter of last year, including Microsoft, Amazon, Domino’s Pizza, Hilton Hotels and Facebook. Well-known companies. Regarding the put option of Game Station, it is only one of the less conspicuous items.
This is a put option. According to experience, a fund holding a put option on a stock is likely to also hold a short position in the stock. Although the scale cannot be determined, the news that “Melvin is shorting the game station” is unequivocal.
In the next quarter, another 13F report made Plotkin’s small abacus more transparent: Melvin’s Game Station put options position increased to 5.4 million shares during the third quarter, despite the game’s share price at the time. Reached 10.20 US dollars, an increase of 135%.
Encirclement and suppression operations
The actions of Melvin Capital did not escape the eyes of the leader. DFV and his fans heard that Wall Street Capital was shorting the game station, and they started to take action.
At this time, the number of people following DFV has gradually increased. After more than a year of investment, his total account has reached 1 million. He still regularly publishes screenshots of his account total and shareholding status. There are many more people who reply and agree with it than before. When Melvin Capital released its 13F report for the third quarter of 2020, his YouTube channel subscribers had reached 418.
These people are not just his “fans”, they have formed a closer relationship, just like the brothers of loyal spirits like quacks. They not only talked about money, but also about poetry and distant places. According to one of the netizens who was code-named “Toast” on Twitter, DFV’s live broadcast “from the beginning of a few hours of great stock analysis, became a few Hours of great life discussion, delivering positive energy”. Toast was not a member of “Gambling Wall Street” at first. He occasionally saw DFV videos during his road trip, and then “joined” with his girlfriend. “My girlfriend thought I was crazy at first,” the netizen whose real name was Joe Fonicello later said in an interview. “Until she listened carefully to DFV’s stories and theories, she was also persuaded. ”
The couple took out ten thousand dollars and smashed them into the stock of the game station.
Then, they learned that the capital tiger sharks were hunting down the game station, so the reason why this stock could not take off was suppressed by the black hands attributed to Wall Street. In particular, they learned that the big capitalists had over-shorted the game station, and the ratio of short-selling transactions reached 260% of the current liquidity. Many short positions belonged to “naked short sales”, which means that short sellers sold what they did not borrow. stock. Under such circumstances, the stock price of Game Station may get out of control or even collapse.
They are angry. This group of warriors is originally a quagmire. The focus of “Gambling on Wall Street” is “gambling”. Their common motto is YOLO, you only live once, you can only live once, and life is like a roller coaster. You only need to enjoy this. The excitement of the journey. As the saying goes, “Three cups of Turannuo, the five mountains are light. After the dizziness, the spirit is born.” At this moment, investment profit becomes even less important to them. What they want is revenge. “Gambling over Wall Street” immediately became a hot topic at the game station. Many people took out real money to buy the shares of the game station, vowing that even if their money was lost, they would make Wall Street suffer.
“That news ignited our fighting spirit,” said Rod Alzman, a 31-year-old Florida native who called Uberkikz11 on reddit and bet on the game station earlier than DFV: “Everyone rushed. , To fight them.”
Short-stroking, the concept surfaced.
The word short-squeeze originated in futures, which means that the bulls continue to pull up to force the shorts to close their positions. Because it rises to a certain extent in the futures, the short side will be forced to liquidate. Borrowed to the stock market, it is used to describe that the continuous rise of stock prices makes it impossible for the short side to make up at a price lower than its own selling price, and has to chase the increase at a high price.
Reddit user Stonesflyingup opened a post in the special edition, titled “Game Station Squeezing and the Destruction of Melvin Capital”, the main building has no text content, only one video is linked, that is one of the TV series “Chernobyl” Scenario: A nuclear reactor exploded and then the sky collapsed.
On December 23, the stock of Game Station broke through the $20 mark. DFV wore a pink party hat in the live broadcast, held champagne, and clinked glasses with his wife to celebrate. “I don’t have a luxury car,” he said to the camera. “As you can see, I don’t have a luxury house either. This house is even rented. Therefore, this journey is simply unparalleled for our family.”
On January 11, 2021, Game Inn announced that Ryan Cohen had entered the board of directors. Cohen is the founder of the e-commerce website chewy. He is a man who has created e-commerce miracles. In August 2020, he acquired nearly 10% of the shares of Game Station and became the largest individual shareholder of Game Station. By December, his company The shares held rose to 12.9%. As soon as the news of his joining the board of directors came out, the market was immediately encouraged, and people expected him to bring new vitality to this traditional old chain store.
This news has also injected a new dose of blood into the “Gambling over Wall Street” forums, and more and more people have participated in this action of retail investors to encircle and suppress Wall Street. On January 13, 2021, DFV once again announced a screenshot of his investment account. He said that he would not abandon the game station, and he decided to abandon the realization. More than 40,000 people saw his oath and were greatly encouraged.
“Daddy is still insisting!” commented a netizen named freehouse throwaway: “It feels so great.”
After another 10 days, the number of DFV live broadcast viewers reached 190,000. Now, the number of subscribers to his YouTube channel has exceeded 74,000. Then, Tesla owner Elon Musk and Dallas Mavericks owner Mark Cuban also joined the carnival, and the emotions in the arena became more and more boiling.
The stocks of Game Station got on the rocket, and went straight to the moon as the rangers who “bet on Wall Street” often said.
Robin Hood’s Betrayal
Robin Hood plays an important role that cannot be ignored in this legend of siege and suppression of Wall Street.
Robin Hood is an emerging Internet brokerage organization. Compared with traditional trading platforms, its biggest advantage is commission-free trading. For users whose investment amount is less than US$1,000, Robin Hood only charges a membership fee of US$5 per month, and thereafter will not charge any commission fees in the transaction. Their review of user investment conditions is also relatively lax. Of course, its operation interface is also very simple and easy to use, and even provides free stocks for user experience, and allows the purchase of fractional stocks, so it is favored by retail investors. Especially those large-scale retail investors who rushed in after being stimulated by the Fed’s large-scale water release policy during the epidemic. They have neither too much capital nor much trading experience. They like this kind of low-threshold trading platform most.
The founder and CEO of Robin Hood, Vlad Tenev, was born in Bulgaria and immigrated to the United States with his parents when he was 5 years old. In 2013, he founded Robin Hood with his classmate Hart who was a college student at Stanford. They are committed to lowering the barriers to transactions and allowing more people to participate in financial investment activities. Their slogan is “Let the people trade freely” and support individual investors to challenge Wall Street and achieve “financial democratization.” After all, the company’s name is Robin Hood-in British folklore, Robin Hood is a green forest hero who is outstanding in martial arts, wit and brave, hates officials and priests, and is a hero of the green forest.