Author Topic: GME deathwatch - how to profit?  (Read 45606 times)

frugalnacho

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Re: GME deathwatch - how to profit?
« Reply #400 on: June 03, 2021, 10:59:08 AM »
So what is your financial advice? YOLO into GME?

frugalnacho

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Re: GME deathwatch - how to profit?
« Reply #401 on: June 03, 2021, 12:42:31 PM »
I think what he's saying is that the market makers can create shares out of thin air.  You want to buy a share?  Bam the market maker sells you a share, and then has 21 days to find a real share to officially complete the transaction.  But then 21 days later they just create another share so that the share they sold to you won't be reported as a "failed to deliver".  The transaction to you isn't a fail to deliver, because they delivered you a share by creating another share with a new 21 day due date.  Rinse and repeat so you are always delivering shares by creating new shares, without ever actually reducing the net amount of shares that need to be delivered.  They aren't actually creating anything, just kicking the can down the road.   Like if you have no money but a huge credit card bill, so you pay it off with a different credit card, then when that comes due you pay it off with another credit card.  It appears that you are paying your credit cards off, but really you just keep shuffling the credit around and extending the due date, but eventually you have to pay that final credit card with real money just like they have to deliver those shares with real shares.  The root problem is that you don't have any money to pay your card, just like they don't have any shares to pay, and are just playing a game to obfuscate so on paper it doesn't look like are failing to pay off their share debt. 

The individual buying the shares has no idea what is going on behind the scenes though, so they just think they legitimately own a share and have voting rights.  When the number of people believing they have legitimate voting rights is greater than the number of real shares the jig will be up though because they can't kick that can down the road.

Or maybe I'm not understanding it and someone else can chime in with more information. 

frugalnacho

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Re: GME deathwatch - how to profit?
« Reply #402 on: June 03, 2021, 02:04:46 PM »
I think that's the crux of the whole thing.  Most people understand that buying the stock means it gets settled and you are the owner, but WSB and arebelspy are claiming there are shenanigans afoot.  I guess we will find out June 11 if the number of votes matches the number of share owners. 

Also I am not well versed on this and may have no idea what I am talking about.  I just index and don't know anything about puts or options.  I get some information from WSB and some from this thread, but I don't claim to understand all of it, so hopefully more people can chime in and correct anything incorrect I've said. 

bacchi

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Re: GME deathwatch - how to profit?
« Reply #403 on: June 03, 2021, 02:31:23 PM »
I see T+6. Where is the T+21 from?

https://www.sec.gov/investor/pubs/regsho.htm

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If a participant has a failure to deliver that the participant can demonstrate on its books and records resulted from a long sale, or that is attributable to bona fide market making activities, the participant must close out the failure to deliver by no later than the beginning of regular trading hours on the third consecutive settlement day following the settlement date, referred to as T+6.
(bolded)

Is the accusation/assumption that broker-dealers are routinely ignoring the T+x law?


A stock with persistent FTD has even more regulations.

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In addition, Rule 203(b)(3) of Regulation SHO requires that participants of a registered clearing agency must immediately purchase shares to close out failures to deliver in securities with large and persistent failures to deliver, referred to as “threshold securities,” if the failures to deliver persist for 13 consecutive settlement days.

I am skeptical that stock market makers have a huge short on their books. They buy and sell all day to maintain liquidity. Why would they even be trading in GME when the volume is so high and the spread is so low?

I can see it happening with options market makers, who don't always hold 100 shares for each short call they hold and where the liquidity is lower.

bwall

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Re: GME deathwatch - how to profit?
« Reply #404 on: June 04, 2021, 06:12:02 AM »
This could be big news, potentially, to test the T+21 theory. One prime broker will no longer execute/hold naked options in GME as of today.

https://finance.yahoo.com/news/jefferies-blocks-short-sells-gamestop-174600093.html

“Until further notice, Jefferies Prime Brokerage will no longer offer custody on naked options in GME, AMC and MVIS,” the memo noted. The firm will no longer allow the execution of short sells of those securities, the memo continued, noting that other stocks may be added to that list."

I believe that there are only a handful of prime brokers. One of them just declined this business; perhaps because they finally (!) delivered all their shares? In other words, if a trade is profitable for a prime broker, why would they ever, ever leave that trade?

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #405 on: June 04, 2021, 10:52:07 AM »
So what is your financial advice? YOLO into GME?
Hilarious!  Thanks for that.


I’m not understanding the “extra votes” and “fake shares” theories. I glanced at Reddit and most of what I read doesn’t make sense.

Can someone ELI5?

I’m assuming these are supposed to indicate that hedge funds are still trying to make money off meme stocks dropping, just in a covert way, but I’m not following how you could get more votes than shares (there’s only one owner per share), and I don’t understand what a fake share would be.
Before GME, my understanding of market makers was institutional investors that have a pool of the stock.  They make a market by placing or matching orders on the market for a specific stock.  They have a lot of stock, so if people are buying heavily they just sell from their inventory.  And maybe increase the distance between the buy/sell price if it looks risky.

My tentative understanding now is that market makers can have shares on credit.  The market trusts them to do their job of matching buyers and sellers.  So when they don't have enough shares to sell, they have longer than usual to find shares to cover a negative position.  Everyone else has to settle their negative shares (credit?) in days, but apparently market makers get weeks to settle. (I don't have evidence outside of reddit for that claim)

The SEC doesn't have big enough fines to put market makers out of business.  I've looked at the SEC report on Citadel Securities, and their last fine for "failure to deliver" was $10,000.  I think they're the largest market maker, so a $10,000 fine means nothing to them.

So when a market maker actually finds the shares they need, the rules say the problem is resolved.  If a market maker has -100,000 shares, and obtains +100,000 shares, it's back to zero and the problem is resolved.  But then the market maker can go -100,000 the next second/hour/day (not sure which) and reset the clock.

So in theory, market makers have to come clean every 21 days.  If they have a negative balance of shares, they have 21 days to fix it.  But apparently, they can fix it, and then go negative again.  So they can keep the cycle going.

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #406 on: June 04, 2021, 11:08:45 AM »
Since I saw the reports of deep in the money GME calls being bought and exercised the same day, I've believed there's cheating going on.  But I wonder if these market makers are better at cheating than WSB believes?  They might have infinite ability to pull this stunt, if my wildly speculative theory is correct.

I was really surprised how many times the SEC has fined Citadel Securities, for example.  It looks to me like they are treating fines like traffic tickets, and just continue speeding.

I believe "self interest" makes for strong conspiracies.  Several market makers are all in the same situation: they need to hide negative share balances, and they need to not lose money doing it.

So my wildly speculative theory is they pay nothing for deep in the money GME calls.  (What?)  Two market makers in a similar situation have an agreement: I'll sell you calls, and you sell me calls.  So one sells call options using "new fake shares".  The second firm buys the call options and immediately exercises those calls.  The new fake shares pass from one market market to another.  Then they flip roles, and the buyer becomes the seller.

So it's a bit like "fake share laundering".  I start with 20 day old negative shares.  I buy enough calls to cancel out those negative shares, leaving me with zero shares.  So now my balance sheets are clean, and I've met my obligations as a market maker.  Then, I turn around and become a seller of call options: I create new negative shares, and hand them over to whoever exercises the call option.

It's kinda beautiful if this is what's happening.  A cabal of market makers all covering up that they've had massive negative shares for months.  A conspiracy driven by their own self interest: if they expose another market maker, they're going down as well.  If they don't participate, they pay higher costs to keep the negative share balances.

But now the hard part: how do I prove/disprove the theory?

bwall

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Re: GME deathwatch - how to profit?
« Reply #407 on: June 04, 2021, 02:45:08 PM »
It's kinda beautiful if this is what's happening.  A cabal of market makers all covering up that they've had massive negative shares for months.  A conspiracy driven by their own self interest: if they expose another market maker, they're going down as well.  If they don't participate, they pay higher costs to keep the negative share balances.

But now the hard part: how do I prove/disprove the theory?

I guess it's important to define the terms :/

I can't imagine a scenario where the above described activities would be 'kinda beautiful'. Bankers in London conspired for decades (!) to keep LIBOR artificially low, to their benefit at the expense of other market participants. The rot was so bad that reforming LIBOR proved impossible.  LIBOR had to be disbanded and replaced with another system, which has proven really hard to do. So we already have proof that a conspiracy of self interested parties can be carried out for multiple decades.

If the same thing is happening here, where the powerful and connected who have all the considerable advantages of incumbency (deeper pockets, greater liquidity, clear information advantage, education advantage, etc.) and are able to leverage those against a disparate group of people who outwitted the incumbents in spite the incumbents' insurmountable advantages, well, I'd find that extremely depressing.

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #408 on: June 05, 2021, 04:45:16 AM »
It would certainly be artful and elegant to keep all the cheating to themselves.  But I don't follow why you would be surprised - Citadel has been caught front running it's own client's orders.  If they can cheat their clients and get away with it, this short share kiting is tame by comparison.

If the only thing against my theory is good behavior, that's easy to disprove.  Here's 140+ pages of FINRA allegations and fines against Citadel.  You might think this is a rap sheet of a repeat criminal, but Citadel is one of the largest (or the largest) market maker in the world.
https://files.brokercheck.finra.org/firm/firm_116797.pdf#page=39

bwall

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Re: GME deathwatch - how to profit?
« Reply #409 on: June 07, 2021, 04:21:47 PM »
hmm..... I wasn't trying to convey surprise--just how depressing it would be if powerful incumbents could (illegally?) collude to escape damages from their wrong-way bet.

In other news, GME stock closed up over $30 today to close above $280. Because why would someone just HAVE to buy GME today, when it's up $20, when they could've bought on Friday? Or why not wait a few days to get it below $250? Rhetorical questions, of course, and not signs of anything nefarious, just on the face of it doesn't appear entirely rational.

ChpBstrd

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Re: GME deathwatch - how to profit?
« Reply #410 on: June 07, 2021, 08:20:40 PM »
Because why would someone just HAVE to buy GME today, when it's up $20, when they could've bought on Friday? Or why not wait a few days to get it below $250? Rhetorical questions, of course, and not signs of anything nefarious, just on the face of it doesn't appear entirely rational.

If there were two markets, one random and irrational and the other rational and moderately predictable, which would you invest in? This is meme stocks vs. index funds in a nutshell. I don't think GME is a short squeeze any more, I think it is a social media phenomenon.

At some point though, as with the Nasdaq bubble of '97-2000, the irrational market poses a threat to the rational one.

secondcor521

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Re: GME deathwatch - how to profit?
« Reply #411 on: June 07, 2021, 09:32:44 PM »
Okay normally I borrow stock from shareholder A to short it and sell it to shareholder B. By lending out their share, A gives up voting rights, and b can vote. 1 share, one vote.

Now say I'm a market maker, and someone buys a share of GME. I say okay, here's the share. As a market maker I can create that share out of thin air, and I'm supposed to match with a buyer within a few days (longer cause I'm a market maker). But now I don't. I get  failure to deliver (FTD). But then I use options trickery to delay the FTD another few weeks. Repeat.

I'm (the market maker) short that share, but by creating the share, now there's an extra owner entitled to a vote.

Do that tens of millions of times and now there's more people with shares that want to vote than there are real shares.

I glossed over kinda quickly cause on phone, but I think that should be enough to understand, yeah?

With all due respect for my friend @arebelspy:

I understand the idea and the suggested mechanics.  I'm just not convinced that's how things actually work.

For one thing, I have to believe that there have been plenty of companies out there with measureable short interest when a shareholder vote occurred.  I find it extraordinarily unlikely that there has never been a case where a bunch of shorts voted and all the longs voted and exceeded the number of issued shares.  (Or any of the other problematic shareholder events happened - see item 3 below.)

Second, I'm not convinced that reddit is a good place to go for how things actually work, just in general.  While some people there might have some understanding of how things work, I doubt most of them actually know how things really work.

Third, in addition to the shareholder voting issue, for any company issuing a dividend, or going bankrupt, or merging with another company, or splitting into two companies, or doing a stock split or reverse stock split -- most if not all of those things become very problematic for these "market maker naked short share creator" folks.  And there may be others that I'm not thinking of.  It's not just a matter of FTDs and rolling over options, it's all these other things.

Is there any non-reddit proof that when a market maker sells a naked short on a stock and "creates" a share, that the person buying that share actually has voting rights?  If it were a real share, sure.  But I think somewhere at the bottom of all of this the stock's transfer agent actually has their own records of who owns the actual real shares, and I'm sure they solicit and accept proxies only from those real owners.  I know there's a process for shares owned by brokers on behalf of their clients to pass along these proxies, but I have to believe that in that process the broker knows who the real beneficial owners of the real shares are.

In other words, if GME's stock transfer agent's records show that Robinhood owns 1,000 shares of GME and a shareholder vote comes up, the transfer agent is only going to issue 1000 shares worth of proxies to Robinhood.  If Robinhood passes out those proxies to the non-real shareholders, then problems will happen, but the transfer agent is going to be able to isolate it by broker.

And these proxies are all traceable.  The transfer agent knows (I forget how; I think there are unique IDs assigned to each company/shareholder combination) which proxy belongs to which block of stock.  I was an HP shareholder during the Compaq acquisition proxy war.  Because I was also an employee, I had HP shares in about four different places, so I got four different proxies and voted four different proxies.

I'm also fairly certain that the transfer agent is continuously tabulating results.  They're not going to wake up Wednesday morning and discover a problem.  If there is a problem they'll be aware of it as soon as it happens and will probably work with the associated broker to straighten things out.

And of course, it's all computerized and barcoded and scantroned and backed up and probably audited to ISO 9001 or better standards, so even though there may be millions of shares, it's not like someone's going to make a math error.

So I'm going to take the other side of the GME shareholder meeting potential debacle and say it won't happen.  Meaning:
 whatever shareholder vote counts they announce will be less than the number of issued shares and there will not be panic or chaos due to synthetic shorts or whatever you want to call it.

arebelspy

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Re: GME deathwatch - how to profit?
« Reply #412 on: June 07, 2021, 10:38:04 PM »
With all due respect for my friend @arebelspy

No caveats like this needed; I appreciate the alternative viewpoint and frank discussion. :D

Quote
For one thing, I have to believe that there have been plenty of companies out there with measureable short interest when a shareholder vote occurred.  I find it extraordinarily unlikely that there has never been a case where a bunch of shorts voted and all the longs voted and exceeded the number of issued shares.  (Or any of the other problematic shareholder events happened - see item 3 below.)

Sure, there have been plenty of companies with measurable short interest, but typically one gives up voting rights when loaning out their shares, so the number of votes remains the same. If reddit (conspiracy) theories are correct, citadel issuing tons of fake (synthetic) shares means there are many shares out there where the owners are expecting to (and trying to) vote, many more than there are actual shares. In other words, this isn't a typical "stock is heavily shorted" situation.

Quote
Second, I'm not convinced that reddit is a good place to go for how things actually work, just in general.  While some people there might have some understanding of how things work, I doubt most of them actually know how things really work.

100% with you there. Heck, I don't know how things really work. :)

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Third, in addition to the shareholder voting issue, for any company issuing a dividend, or going bankrupt, or merging with another company, or splitting into two companies, or doing a stock split or reverse stock split -- most if not all of those things become very problematic for these "market maker naked short share creator" folks.  And there may be others that I'm not thinking of.  It's not just a matter of FTDs and rolling over options, it's all these other things.

Oh yeah, baby. There's a ton of things that could be a catalyst for a huge squeeze if there are a ton of unreported shorts, not just a share recall. This point seems bullish?

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Is there any non-reddit proof that when a market maker sells a naked short on a stock and "creates" a share, that the person buying that share actually has voting rights?  If it were a real share, sure.

Think about it this way... the share doesn't have voting rights, but that person who bought it sure thinks it does. Maybe their broker even thinks it does. So they try to vote it. And a ton of votes come in, and now the company needs to figure out which share are real, which aren't, and initiate a share recall.

Quote
But I think somewhere at the bottom of all of this the stock's transfer agent actually has their own records of who owns the actual real shares, and I'm sure they solicit and accept proxies only from those real owners.  I know there's a process for shares owned by brokers on behalf of their clients to pass along these proxies, but I have to believe that in that process the broker knows who the real beneficial owners of the real shares are.

The broker is given a share by citadel (the market maker) for their client who bought a share of GME. How do the brokers know if it's real or fake? They just marked that client as having a share, and when voting time comes, they give them a proxy vote.

Quote
In other words, if GME's stock transfer agent's records show that Robinhood owns 1,000 shares of GME and a shareholder vote comes up, the transfer agent is only going to issue 1000 shares worth of proxies to Robinhood.  If Robinhood passes out those proxies to the non-real shareholders, then problems will happen, but the transfer agent is going to be able to isolate it by broker.

So Robinhood owns 1k shares of GME, then reports 5k votes. Problem. Fidelity owns 3MM shares, reports 10MM votes. Problem. Etc.

Quote
And these proxies are all traceable.  The transfer agent knows (I forget how; I think there are unique IDs assigned to each company/shareholder combination) which proxy belongs to which block of stock.  I was an HP shareholder during the Compaq acquisition proxy war.  Because I was also an employee, I had HP shares in about four different places, so I got four different proxies and voted four different proxies.

I'm also fairly certain that the transfer agent is continuously tabulating results.  They're not going to wake up Wednesday morning and discover a problem.  If there is a problem they'll be aware of it as soon as it happens and will probably work with the associated broker to straighten things out.

Right. I think it's quite possible that they've known for weeks it's an issue, and Ryan Cohen and Gamestop's twitter has been cute about it (including GS official twitter tweeting MOASS--acronym used for Mother of All Short Squeezes) but are waiting for all the votes to come in to announce it at the meeting. They made their shareholder's meeting only 15 minutes, and though many shareholder meeting times are down because of COVID, I think there's a chance that it's because they're announcing the votes are in too much, and they're initiating a recall (or some other action).


Quote
So I'm going to take the other side of the GME shareholder meeting potential debacle and say it won't happen.  Meaning:
 whatever shareholder vote counts they announce will be less than the number of issued shares and there will not be panic or chaos due to synthetic shorts or whatever you want to call it.

I'm excited to see.

Even if I'm wrong, I'm content to hold for the next t+21 cycle.


So what is your financial advice? YOLO into GME?

lol

This is where I reiterate none of my speculation is financial advice and I'm not a financial advisor, and also disclose again that I'm long GME.
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arebelspy

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Re: GME deathwatch - how to profit?
« Reply #413 on: June 08, 2021, 06:09:16 AM »
Looks like the final votes are filed with the SEC within 4 business days of the shareholder's meeting, so results may not be in tomorrow.
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MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #414 on: June 08, 2021, 06:36:48 AM »
Second, I'm not convinced that reddit is a good place to go for how things actually work, just in general.  While some people there might have some understanding of how things work, I doubt most of them actually know how things really work.
I mostly agree, but I can't find information on it.  So I try to prefix comments about how MM work and T+21 with the fact it came from reddit, although I think I've been lax about stating that recently.

So I'm going to take the other side of the GME shareholder meeting potential debacle and say it won't happen.  Meaning:
 whatever shareholder vote counts they announce will be less than the number of issued shares and there will not be panic or chaos due to synthetic shorts or whatever you want to call it.
A panic is not required for pushing GME's price higher - just look at recent activity.  As to chaos, GME stock has been chaotic for months.  How do you reconcile those claims with the price moves of GME in 2021?

Ryan Cohen's letter to GME's board is where all the hopes for GME's future started.  He recently revealed GME will sell NFTs, and the stock surged.  There's some others I'm forgetting, but I see plenty of evidence Mr Cohen can move the stock.  And he will officially take control of GameStop (become their chairman of the board) at this Wednesday's shareholder meeting.  I strongly suspect the stock moves higher, but I haven't put money behind it (quite the opposite, long term).

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #415 on: June 08, 2021, 06:47:01 AM »
The founder of Interactive Brokers was on CNBC recently, and he had a different explanation for excess shares of meme stocks like GME.  People who hold shares in a margin account apparently also give their brokers the ability to loan those shares out.  So the shares are loaned to someone else, who sells them.  And "round and round" it goes, I believe he said.  So his explanation is that the shared loaned out are the reason for artificially higher numbers of shares.

IBKR's advertisements claim they "revolutionized" trading with being one of the first to offer a digital trading platform.  Point is they've been doing this for decades with the same founder, so he's a better authority than me on this stuff.


Speaking of CNBC / NBC:

https://www.nbcnews.com/business/personal-finance/trading-hot-stocks-gamestop-seems-fun-until-you-look-beneath-n1258147
"As the biggest market maker in the U.S., Citadel Securities has a bird's-eye view on many stocks, as well as the overall market. Citadel data showed it handled 29 percent of trading volume in GameStop the week the stock crashed."

arebelspy

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Re: GME deathwatch - how to profit?
« Reply #416 on: June 08, 2021, 08:30:26 AM »


  I strongly suspect the stock moves higher, but I haven't put money behind it (quite the opposite, long term).

I actually think the shorts will tank it on the earnings report.

They can only do it for so long though.

Enjoy this crude hand drawn chart, courtesy of Reddit, of the weekly lows of GME since January:
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ChpBstrd

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Re: GME deathwatch - how to profit?
« Reply #417 on: June 08, 2021, 08:51:17 AM »
100% agree on not making investment decision based on things typed into reddit (or any social media) by random usernames.

Some quick googling reveals that shorts are not registered as the owners of the securities they borrow. Neither are the original owners. The people who buy the loaned shares are registered as owners.

https://www.investopedia.com/ask/answers/05/shortsalevotingrights.asp

This would imply that if you have a stock in your margin account, and your broker chooses to lend it out, you don't have voting rights unless your broker borrows shares during the record date to replace the ones they loaned out. This is confirmed by this example disclaimer language:

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Industry regulations may limit, in whole or in part, your ability to exercise voting rights of securities that have been lent or pledged to others. You may receive proxy materials indicating voting rights for a fewer number of shares than are in your account, or you may not receive any proxy materials.
Source: https://www.apexclearing.com/finra-rules/

bwall

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Re: GME deathwatch - how to profit?
« Reply #418 on: June 08, 2021, 09:00:29 AM »
If there were two markets, one random and irrational and the other rational and moderately predictable, which would you invest in? This is meme stocks vs. index funds in a nutshell. I don't think GME is a short squeeze any more, I think it is a social media phenomenon.

At some point though, as with the Nasdaq bubble of '97-2000, the irrational market poses a threat to the rational one.

I think this is a good an explanation as any.

GME is up another $35-$40 today, to $315~ish, on no news. On nothing, really. Overall market is flat.

ChpBstrd

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Re: GME deathwatch - how to profit?
« Reply #419 on: June 09, 2021, 07:46:10 AM »
Kinda changing the subject here, but staying on the topic of three-letter stocks starting with G and containing E. I wonder if GEO could be the next GME?

Short % of float on 4/30/21:
 GME: 28.96%
 GEO: 48.68%

Short % shares outstanding on 4/30/21:
 GME: 16.7%
 GEO: 31.47%

Number of shares short Mar-Apr change:
 GME: decreasing
 GEO: increasing

P/E:
 GME: negative and negative for the foreseeable future
 GEO: 5.38 (forward PE is around 6)

1 year price performance:
 GME: 2710%
 GEO: -46%

The story with GEO is they are a leveraged (D/E = 316%) private prison operator structured as an REIT (and big Republican donor) facing both pandemic costs and Joe Biden’s calls to abolish the use of private prison contractors. Already they’ve lost several contracts for the federal Bureau of Prisons, and BOP work accounted for 14% of revenue. Prisons aren’t exactly like apartments, so GEO is looking at years of vacancy - while paying the debts on these facilities - before they can sell them at a loss or contract with a local jurisdiction who will have a negotiating advantage as monopolistic buyers against a seller whose back is against the wall. GEO recently cut their 10% dividend to try and de-leverage, and they may change out of their REIT status soon to obtain more financial flexibility, as competitor CoreCivic did.

My question, which I don’t have time to research, is how much of their revenue comes from reliable sources, such as red-state state governments, versus how much could be cut in the next two years? Is GEO a falling knife with questionable ethics and a suddenly untenable debt burden or a compelling value play that will double by the next election season, when prison outbreaks of COVID-19 are a historical footnote? In the meantime, I think GEO has a much better chance of being a short squeeze candidate near the point of maximum pessimism, like where GME was several months ago. Additionally, GEO might be seen as a portfolio hedge against social chaos; their services might be sought after and their political critics muted in the event of rising crime or conspiracy-theory-led outbreaks of insurrection, ethnic conflict, or terrorism. Thoughts?

GEO is up 40% and climbing this morning. Called it! My profit is zero due to cowardace.

bwall

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Re: GME deathwatch - how to profit?
« Reply #420 on: June 09, 2021, 09:00:48 AM »
Kinda changing the subject here, but staying on the topic of three-letter stocks starting with G and containing E. I wonder if GEO could be the next GME?

Short % of float on 4/30/21:
 GME: 28.96%
 GEO: 48.68%

Short % shares outstanding on 4/30/21:
 GME: 16.7%
 GEO: 31.47%

Number of shares short Mar-Apr change:
 GME: decreasing
 GEO: increasing

P/E:
 GME: negative and negative for the foreseeable future
 GEO: 5.38 (forward PE is around 6)

1 year price performance:
 GME: 2710%
 GEO: -46%

The story with GEO is they are a leveraged (D/E = 316%) private prison operator structured as an REIT (and big Republican donor) facing both pandemic costs and Joe Biden’s calls to abolish the use of private prison contractors. Already they’ve lost several contracts for the federal Bureau of Prisons, and BOP work accounted for 14% of revenue. Prisons aren’t exactly like apartments, so GEO is looking at years of vacancy - while paying the debts on these facilities - before they can sell them at a loss or contract with a local jurisdiction who will have a negotiating advantage as monopolistic buyers against a seller whose back is against the wall. GEO recently cut their 10% dividend to try and de-leverage, and they may change out of their REIT status soon to obtain more financial flexibility, as competitor CoreCivic did.

My question, which I don’t have time to research, is how much of their revenue comes from reliable sources, such as red-state state governments, versus how much could be cut in the next two years? Is GEO a falling knife with questionable ethics and a suddenly untenable debt burden or a compelling value play that will double by the next election season, when prison outbreaks of COVID-19 are a historical footnote? In the meantime, I think GEO has a much better chance of being a short squeeze candidate near the point of maximum pessimism, like where GME was several months ago. Additionally, GEO might be seen as a portfolio hedge against social chaos; their services might be sought after and their political critics muted in the event of rising crime or conspiracy-theory-led outbreaks of insurrection, ethnic conflict, or terrorism. Thoughts?

GEO is up 40% and climbing this morning. Called it! My profit is zero due to cowardace.

Wow! Well done!


arebelspy

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Re: GME deathwatch - how to profit?
« Reply #421 on: June 09, 2021, 09:39:27 AM »
Nothing noteworthy at GME shareholders meeting.

Vote counts filed with SEC in four business days.

EDIT: Vote count above shares cannot be legally reported on the 8-K form, must be normalized.

But sounds like the SEC is investigating, with cooperation from GameStop.
« Last Edit: June 09, 2021, 10:06:49 PM by arebelspy »
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MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #422 on: June 09, 2021, 10:21:20 AM »
Not much movement in GME at all, up or down, so far.

On July 31st the current GameStop CEO steps down.

My impression is that most CEOs are very aware of business fundamentals - they have to talk to shareholder's every quarter about it.  To align their incentives with the company, they get performance bonuses that typically involve stock options.

I wonder how they're going to find a new CEO.  A year ago this retail business was priced at $5/share, and now it's $300/share.  So will new CEOs be offered stock options at $300 per share?  Will they have to take a retailer with a -500 forward P/E ratio and turn it around?  Most performance measures will heavily penalize any CEO who agrees to lead GameStop.  I wonder what they're going to do before August.

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #423 on: June 10, 2021, 07:21:04 AM »
I wonder how they're going to find a new CEO ...  Most performance measures will heavily penalize any CEO who agrees to lead GameStop.
It amuses me they didn't find someone with experience being CEO - but they did find someone with 2+ years experience as "Country Manager, Australia" (since 2019), according to this:
https://www.crunchbase.com/person/matt-furlong

Ranking countries by exports, Australia comes in at #19, between Belgium and Poland.  I would hazard a guess this wasn't their top pick for CEO.
https://en.wikipedia.org/wiki/List_of_countries_by_exports

I'm also surprised that after the NFT tease, there was nothing bigger to reveal.  They announce NFTs for games 2 weeks before their big quarterly meeting... and then at the meeting, nothing.

In the pre-market trading, GME is down from yesterday's close.

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Re: GME deathwatch - how to profit?
« Reply #424 on: June 10, 2021, 08:37:16 PM »
Nice! In January I bought 1 GME for 140. In February I put in a long limit order to sell at 330. Looks like it went through! Now the price is down to $230.

Now I need to decide to either take the money and run, or try again with a long dated buy limit for more shares.

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #425 on: June 11, 2021, 06:08:24 AM »
GME stock dropped 27% yesterday, the first day after their earnings report.

... I see plenty of evidence Mr Cohen can move the stock.  And he will officially take control of GameStop (become their chairman of the board) at this Wednesday's shareholder meeting.  I strongly suspect the stock moves higher, but I haven't put money behind it (quite the opposite, long term).
Wrong prediction.  I thought Mr Cohen's motto with customer service was to overdeliver ... but then he teased NFTs and delivered... nothing.


I actually think the shorts will tank it on the earnings report.
Correct prediction.  Earnings were disappointing, and Mr Cohen mentioned diluting GME stock by another 5 million shares at some point.


Back to the incoming CEO, they were a General Manager (Director) and then a Country Manager (Director?  Vice President?).  So just over 2 years as a Vice President.  I don't know to what extent that lack of leadership experience played into the market drop in GME yesterday.

"From what I have seen, if Amazon posts a job with the title “General Manager”, it’s more likely to be Director level position."
https://www.quora.com/What-is-the-difference-between-a-general-manager-and-a-senior-manager-at-Amazon-Are-they-both-at-level-7-or-whats-the-difference

"Directors are Level 8. Vice presidents are Level 10, while senior vice presidents are Level 11"
https://mashable.com/2013/10/15/amazons-corporate-ladder/

arebelspy

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Re: GME deathwatch - how to profit?
« Reply #426 on: June 11, 2021, 07:20:29 AM »
Wrong prediction.  I thought Mr Cohen's motto with customer service was to overdeliver ... but then he teased NFTs and delivered... nothing.

They announced the SEC is looking into trading/share manipulation around the stock.

My bet is it has to do with the outstanding number of shares.

I think he is limited on what he can say.

As far as business strategy, I think he has some things cooking, but right now GME is the play for the short squeeze.

Quote
Earnings were disappointing

What? They crushed earnings. By like 50% better than expected. How were they disappointing?

The same thing happened last earnings report 3 months ago; better than expected, huge dip, big rebound.

Market isn't open, we'll see if the latter happens.

Edit: looking like not. Possibly because GameStop completed their ATM offering? We'll find out next week.
« Last Edit: June 11, 2021, 11:39:33 AM by arebelspy »
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MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #427 on: June 13, 2021, 11:17:58 AM »
Earnings were disappointing
What? They crushed earnings. By like 50% better than expected. How were they disappointing?
They did have a smaller than expected loss - Yahoo says they expected to lose -0.86 per share, and only lost -0.45 per share.

"GameStop tried to paint its Q1 performance in the best possible light. The company noted that sales increased 25% year over year to $1.28 billion ..."
Two years ago, GameStop earned a small profit on $1.55 billion of revenue during the first quarter -- and that was considered a terrible performance. In the first quarter of fiscal 2018, GameStop posted adjusted EPS of $0.30 on $1.79 billion of revenue."
https://www.fool.com/investing/2021/06/13/gamestop-earnings-no-sign-of-a-turnaround/

Skipping last year during the pandemic, it's revenue (in billions): 1.79 .. 1.55 .. 1.28 for years 2018, 2019 and 2021.  GME did well compared to store closures in a pandemic ... but compared to normal years, the earnings feed the story of a retail store in decline.

WoodsRun

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Re: GME deathwatch - how to profit?
« Reply #428 on: June 22, 2021, 10:24:33 AM »
GameStop completed their 5,000,000 share offering and raised over $1,000,000,000 in cash since they announced the offering on June 9, 2021.

Seems like they are transitioning into a tech company rather than just an e-retailer.

arebelspy

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Re: GME deathwatch - how to profit?
« Reply #429 on: June 22, 2021, 01:29:26 PM »
Indeed! They aren't allowed to declare over the total number of shareholders voted, so they announced that exactly 100% voted while simultaneously announcing the SEC is investigating trading on GameStop stock.
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arebelspy

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Re: GME deathwatch - how to profit?
« Reply #430 on: June 24, 2021, 01:45:42 AM »
Look at the number of votes on the 8K and look at the float. And then look at how many couldn't vote (e.g. etoro that reported only 63% of their eligible gme holders voted).

Another t+21 day is here. Curious to see how the price changes over the next two days. 219 right now.
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arebelspy

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Re: GME deathwatch - how to profit?
« Reply #431 on: June 25, 2021, 12:57:48 AM »
Yeah, I stand corrected.

This is the best summary of the votes I found: https://www.reddit.com/r/Superstonk/comments/nwc4mi/psa_the_votes_are_in_heres_all_you_need_to_know/
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MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #432 on: June 25, 2021, 09:15:28 AM »
Another t+21 day is here. Curious to see how the price changes over the next two days. 219 right now.
This t+21 day does not explain GME spiking on May 25, again on June 2, and again on June 8-9.  Each of those spikes in GME stock price were higher than the prior one.  They don't fit t+21.

From March 12 to May 12, GME went lower and lower, with a few bumps.  Are those bumps the t+21 days?  They're not exactly large jumps in stock price.

What I expect is that if the current t+21 doesn't work - if the price doesn't spike higher - then reddit will claim the "new t+21" is measured off June 2.  And if that fails, they'll start measuring off June 9.

Epor

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Re: GME deathwatch - how to profit?
« Reply #433 on: July 14, 2021, 01:48:32 PM »
Another t+21 day is here. Curious to see how the price changes over the next two days. 219 right now.
This t+21 day does not explain GME spiking on May 25, again on June 2, and again on June 8-9.  Each of those spikes in GME stock price were higher than the prior one.  They don't fit t+21.

From March 12 to May 12, GME went lower and lower, with a few bumps.  Are those bumps the t+21 days?  They're not exactly large jumps in stock price.

What I expect is that if the current t+21 doesn't work - if the price doesn't spike higher - then reddit will claim the "new t+21" is measured off June 2.  And if that fails, they'll start measuring off June 9.

Tomorrow will be another t+21 from 6/24; let's see how the market behaves. (I do not own GME, mine is just a fascination with the evolving GME story).

arebelspy

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Re: GME deathwatch - how to profit?
« Reply #434 on: July 14, 2021, 01:52:01 PM »
I don't think that maths out..it's trading days. I believe it's the 26th of July. Nevertheless, it does seem like the shorts, if they exist in numbers as speculated, can kick the can down the road semi-indefinitely. Some other catalyst would be needed.

MustacheandaHalf's idea was correct, I'm seeing lots of other potential dates people are predicting (notably iirc Aug 23-Sept 7 timeframe). Basically hot air.

Something is happening with GameStop and crypto/nfts though that could be interesting.
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Re: GME deathwatch - how to profit?
« Reply #435 on: July 14, 2021, 01:55:28 PM »
Trading days! Thanks for the correction.

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #436 on: July 15, 2021, 10:08:30 AM »
Yesterday I sold a $200 GME put for about $28/sh, and with the stock down at $164 that wasn't the best choice.  The market has been so volatile, that I didn't know how many down days would occur in a row - and the put expires Friday.

GameStop sells platform games, and they have hinted at NFTs.  It's possible persistent items in games will be represented by NFTs.  But assuming the incentive is profit, I don't see the incentive for NFTs to be compatible across Sony vs Xbox.  There's no incentive to allow your users to switch to a competitor.  At best, I would expect an Xbox-only NFT that can be carried through a game series.  That way if you spend money on an NFT, you have an incentive to stick with the same console.  But it's very easy for Xbox to make their own NFTs - there's nothing keeping NFTs exclusive to GameStop.

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Re: GME deathwatch - how to profit?
« Reply #437 on: July 15, 2021, 12:53:13 PM »
Yesterday I sold a $200 GME put for about $28/sh, and with the stock down at $164 that wasn't the best choice.  The market has been so volatile, that I didn't know how many down days would occur in a row - and the put expires Friday.

GameStop sells platform games, and they have hinted at NFTs.  It's possible persistent items in games will be represented by NFTs.  But assuming the incentive is profit, I don't see the incentive for NFTs to be compatible across Sony vs Xbox.  There's no incentive to allow your users to switch to a competitor.  At best, I would expect an Xbox-only NFT that can be carried through a game series.  That way if you spend money on an NFT, you have an incentive to stick with the same console.  But it's very easy for Xbox to make their own NFTs - there's nothing keeping NFTs exclusive to GameStop.

Makes me think of the good ole days when the only incentive we needed to play galaga or mario all day was "points".

arebelspy

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Re: GME deathwatch - how to profit?
« Reply #438 on: September 12, 2021, 09:44:16 AM »
I'm still long GME.

It isn't done, IMO.
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frugalnacho

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Re: GME deathwatch - how to profit?
« Reply #439 on: September 13, 2021, 05:55:31 AM »
He likes the stock.

ChpBstrd

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Re: GME deathwatch - how to profit?
« Reply #440 on: September 13, 2021, 06:21:54 AM »
Because of a short squeeze or because Ryan Cohen? ;)
It's not in a short squeeze any more. Short % of float is 12.35%.
https://shortsqueeze.com/shortinterest/stock/gme.htm

Must be Ryan Cohen.

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #441 on: September 13, 2021, 09:50:43 AM »
What's amazing about GME stock is how it rebounds, regardless of information.  Analysts digested GameStop's earnings report & earnings call, and sent the stock down 10%.  I read that earnings had greater losses than expected, and there was complete silence from management about the company's transformation.  Seems like valid reasons to lower expectations for GME stock... but WSB jumped in and bought until the stock price recovered.

I'm coming to view WSB as "trolling with money".  They want to change things, make noise... and use money as a form of trolling.  Does the stock price make sense?  Do a troll's posts make sense?  The stock price moves are like a troll's posts, drawing in interested people to discuss - or invest.  The fundamentals aren't there - the stock price could be $150 or $250 without anything taking place.

I see two risks: (1) GME is a mess that comes crashing down.  (2) It works, and people who made money this way keep trying this same approach.  Chase meme stocks endlessly, which also seems like a bad idea.  Maybe GameStop will be more successful than expected, but if that's the case, the Chairman and CEO are suspiciously quiet about the transformation they extolled mere months ago.

YttriumNitrate

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Re: GME deathwatch - how to profit?
« Reply #442 on: September 13, 2021, 10:12:23 AM »
When this thread was started back in January, I would have bet good money that GameStop's stock price would have been back to single digits by September, and I would have been wrong.

GameStop's price is a great example of the old saying that "The market can stay irrational longer than you can stay solvent."

ChpBstrd

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Re: GME deathwatch - how to profit?
« Reply #443 on: September 13, 2021, 12:32:29 PM »
I'm coming to view WSB as "trolling with money".  They want to change things, make noise... and use money as a form of trolling.  Does the stock price make sense?  Do a troll's posts make sense?  The stock price moves are like a troll's posts, drawing in interested people to discuss - or invest.  The fundamentals aren't there - the stock price could be $150 or $250 without anything taking place.

GME & AMC appear to be in the realm of cryptocurrencies and NFTs - tokens with little or no intrinsic value that are traded around as a speculative gamble simply because a large enough ecosystem of traders has developed to do the same, and because more speculators are expected to join. The sudden rise of Dogecoin earlier this year seems to have been based on the humor of the concept, and the expectation that this branding would attract more speculators. Saying the number of speculators will run out is like saying the world will run out of idiots.

The ingredients for a breakout meme speculation appear to be (1) the perceived opportunity to "outsmart" Wall Street traders who would never invest in such a thing based on their paradigm, (2) some imaginable narrative in which the thing goes exponential (a short squeeze, revival of interest in product, taking over the financial system, etc.) that can become a theme for meme/video content, and (3) a "hook" of some sort that might be meme humor or irony or the perception of a mysterious transformative technology.

TL;DR: Buy TurdCoin now.
https://www.mintme.com/token/TurdCoin

WoodsRun

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Re: GME deathwatch - how to profit?
« Reply #444 on: September 16, 2021, 10:21:01 AM »
From what I understood their last quarterly report was good news for GameStop.
Total Revenue was 1.183 Billion compared to 0.942 B the same quarter last year.
Gross Profit was 320M compared to 252M the same quarter last year.

~1.5 Billion in Cash to transform the company.
Almost no debt.

I would not bet against GameStop.

Edit: Numbers.
« Last Edit: September 16, 2021, 10:30:18 AM by WoodsRun »

boarder42

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Re: GME deathwatch - how to profit?
« Reply #445 on: September 16, 2021, 10:25:48 AM »
From what I understood their last quarterly report was good news for GameStop.
Total Revenue was 1.183 Billion compared to 0.942 B the same quarter last year.
Gross Profit was 320M compared to 348M the same quarter last year.

~1.5 Billion in Cash to transform the company.
Almost no debt.

I would not bet against GameStop.

correct this is why its a small value company - lots of cash maybe they decide to make EVs and surpass tesla

Out of favor companies with good balance sheets are poised to pivot and explode.  Picking the right one is hard.  GME is an anomaly due to its Reddit fame.  But IJS a top SCV ETF holds this fund and many other companies everyone of us would look at and say this is shit why would i put my money here - this is the exact reason SCV outperforms VTSAX long term.

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #446 on: September 17, 2021, 08:33:41 AM »
From what I understood their last quarterly report was good news for GameStop.
Total Revenue was 1.183 Billion compared to 0.942 B the same quarter last year.
Gross Profit was 320M compared to 252M the same quarter last year.

~1.5 Billion in Cash to transform the company.
Almost no debt.

I would not bet against GameStop.

Edit: Numbers.
You invest without considering the share price?  It was under $10/sh one year ago, and is now about $209/share, or 20x higher.  Giving your numbers that context, the company looks horrible.

GME's market cap was $565M a year ago, and is $16,000M now.  By the measure used in index funds, GameStop has grown 2700% larger in 12 months.
https://ycharts.com/companies/GME/market_cap

That growth is what spoils the profit numbers you mentioned.  Using your profit numbers divided by market cap:
$252M / $565.6M = profits equal to 44% of it's market cap a year ago
$320M / $16000M = profits equal to 2% of it's market cap now

Yahoo displays GME's total revenue and gross profit.  Look at Jan numbers for 2018, 2019, 2020, 2021 ... both declined every year.  Their gross revenue was $9.2B in 2018, and $5.1B in 2021 - down by almost half.  Their gross profit sank from $3.04B to $1.26B, a decline of more than half.
https://finance.yahoo.com/quote/GME/financials?p=GME

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #447 on: September 17, 2021, 08:44:18 AM »
correct this is why its a small value company - lots of cash maybe they decide to make EVs and surpass tesla

Out of favor companies with good balance sheets are poised to pivot and explode.  Picking the right one is hard.  GME is an anomaly due to its Reddit fame.  But IJS a top SCV ETF holds this fund and many other companies everyone of us would look at and say this is shit why would i put my money here - this is the exact reason SCV outperforms VTSAX long term.
Just to correct a few incorrect statements:
(1) GME's market cap is $16 billion, so it is not considered a small cap company
(2) GME is a stock, not a "fund"
(3) IJS has Macy's ($6.8B) as it's largest holding.  GME ($16B) is too big for IJS.
https://www.ishares.com/us/products/239775/ishares-sp-smallcap-600-value-etf
(4) Since "GME is an anomaly", it cannot also be "the exact reason SCV outperforms VTSAX long term".

boarder42

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Re: GME deathwatch - how to profit?
« Reply #448 on: September 17, 2021, 08:49:53 AM »
correct this is why its a small value company - lots of cash maybe they decide to make EVs and surpass tesla

Out of favor companies with good balance sheets are poised to pivot and explode.  Picking the right one is hard.  GME is an anomaly due to its Reddit fame.  But IJS a top SCV ETF holds this fund and many other companies everyone of us would look at and say this is shit why would i put my money here - this is the exact reason SCV outperforms VTSAX long term.
Just to correct a few incorrect statements:
(1) GME's market cap is $16 billion, so it is not considered a small cap company
(2) GME is a stock, not a "fund"
(3) IJS has Macy's ($6.8B) as it's largest holding.  GME ($16B) is too big for IJS.
https://www.ishares.com/us/products/239775/ishares-sp-smallcap-600-value-etf
(4) Since "GME is an anomaly", it cannot also be "the exact reason SCV outperforms VTSAX long term".

I think alot of what you inferred from what I said was taken out of context. My main point was as everyone laughs about something like game stop thinking it's a terrible bet which a majority of people here think it is. Was the basis for why scv outperforms. People think these small out of favor companies aren't going to do well but a few do. And I haven't looked at ijs holding recently but it held gme as of Feb or march when I last looked. Looks like theyve moved out of it as it doesn't fit the asset classes they are tracking. But prior to the run up AND during the run up ijs held gme.

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #449 on: September 17, 2021, 09:33:44 AM »
correct this is why its a small value company - lots of cash maybe they decide to make EVs and surpass tesla

Out of favor companies with good balance sheets are poised to pivot and explode.  Picking the right one is hard.  GME is an anomaly due to its Reddit fame.  But IJS a top SCV ETF holds this fund and many other companies everyone of us would look at and say this is shit why would i put my money here - this is the exact reason SCV outperforms VTSAX long term.
Just to correct a few incorrect statements:
(1) GME's market cap is $16 billion, so it is not considered a small cap company
(2) GME is a stock, not a "fund"
(3) IJS has Macy's ($6.8B) as it's largest holding.  GME ($16B) is too big for IJS.
https://www.ishares.com/us/products/239775/ishares-sp-smallcap-600-value-etf
(4) Since "GME is an anomaly", it cannot also be "the exact reason SCV outperforms VTSAX long term".
I think alot of what you inferred from what I said was taken out of context. My main point was as everyone laughs about something like game stop thinking it's a terrible bet which a majority of people here think it is. Was the basis for why scv outperforms. People think these small out of favor companies aren't going to do well but a few do. And I haven't looked at ijs holding recently but it held gme as of Feb or march when I last looked. Looks like theyve moved out of it as it doesn't fit the asset classes they are tracking. But prior to the run up AND during the run up ijs held gme.
You're claiming I took "GME is an anomaly" out of context from the sentence "GME is an anomaly due to its Reddit fame"?  Good luck convincing others I misunderstood that sentence - the meaning is quite clear.  You know that GME made national news and defined a new category called "meme stocks".  GME is an anomaly, and it is not appropriate to pretend it's performance is typical for small cap value stocks.

Am I taking your entire two posts out of context?  In both your first and second posts, you point to GME as an example of why SCV outperforms.  I've quoted it so others can see - you're clearly comparing GME with SCV performance, which is not accurate.  It is wrong to claim that GME's performance is somehow an example of SCV performance, when GME is an obvious outlier ("an anomaly").

You are trying to have it both ways.  You both acknowledge "GME is an anomaly due to its Reddit fame", and then claim in two different posts that somehow GME should be used as an example of small cap value (SCV) performance.

You also didn't refute my other points, you just rationalized why you presented wrong information.