[Judgmentality]

The general assumption on WSB is that Melvin Capital is lying and that they haven't closed their positions.

I haven't seen any evidence to suggest they've closed it, and have seen circumstantial evidence suggesting they have not. You don't spend money on ads saying "we no longer have a financial stake in this stock" unless you, you know, have a financial stake in this stock.

Considering this is a hedge fund, I just assume they're lying because, you know, it's a fucking hedge fund.

EDIT: People are claiming CNBC bought ads, not Melvin Capital. https://i.redd.it/8vxraurkcce61.png

[nickysielicki]

The way that WSB has latched onto Melvin as their enemy is to their detriment. It was never about killing Melvin capital, or at least, it shouldn't have been. It ought to have been about the ridiculous short interest on the stock, regardless of who was funding it. Whether or not Melvin specifically has covered their shorts is irrelevant to how the short interest as a percentage of float has changed in the past week.

https://twitter.com/ihors3 is the source to pay attention to, and he's saying (within the past hour) that collectively, the shorts have been largely covered. It's going to be bloody tomorrow.

... Either that, or magical meme energy is going to defy reason once again. Who knows.

[mmahemoff]

They latched onto Citron first. They're focusing on punishing the "enemy" instead of an abstract trade idea. Motivates holding longer instead of jumping ship to cash out.

At this point though, many original buyers have probably sold some/all and most current holders are in it to make a quick buck, not to stick it to the suits. They'll be happy to jump off with a 2x or 3x return if they think the house of cards is about to collapse. Hedge funds sell first and retail traders left holding the bags, complaining the system's all rigged when they should never have entered in the first place. We don't know the exact timing, but we know it will be bloody at some point.

[freeflight]

> They're focusing on punishing the "enemy" instead of an abstract trade idea.

Afaik that's only a somewhat recent change in narrative.

One doesn't get that many people, and that much money, on-board solely on the idea of "Burn your money to punish an enemy that has much more money than you", you get them on-board by promising massive gains and how getting in on this will yield such great returns that people can buy houses and pay off debt.

Which was the original narrative that started all of this and is still the most peddled one.

There are a handful of people who are quite open about the fact that they are willing to burn money to hurt the hedge-funds, but those get mostly drowned out by the flood of comments along the lines of "Look at all the money we made!" pushing people to further buy in even when GME is at $200+ because "We go to the moon!" or some other memefied slogan.

[woah]

I think you’re wrong. Having an enemy always helps rally people to a cause. In the case of this GME saga, WSB’s juvenile hatred towards funds they perceive as their opponents actually ended up being their biggest rhetorical win. The media picked up the story of “Reddit vs hedge funds” and ran with it because it’s much more interesting than “amateur investors want to get rich quick”. That generated the huge public interest, and was helped by a large array of pundits and politicians(like AOC) who wanted to get their nose in the publicity trough when they saw the media feeding frenzy. If the message had only been about some Reddit get rich quick scheme, nobody would have cared, and it would not have gone far.

[loganfrederick]

If the stock continues going up this week, it's that the "magical meme" energy is actually the momentum traders and various celebrities who want to keep the story going by putting more money into it. Of course, they are then likely to flip their positions for a profit before they tell their followers they've sold, leaving the fans holding the bag. Just at a more extended timeframe than you'd predict.

[dorkwood]

The driving force behind the movement is a David and Goliath story. Take away Goliath, or turn the enemy into some abstract concept, and you weaken the story. I'm not sure it would have worked as well.

Organized pump and dumps aren't anything new, but this is the first I've seen that used a story with mass appeal to energize its base.

[jonnyone]

>defy reason once again.

Nothing I've read about this hints that reason was ever defied. If anything reason was used cunningly.

[samename]

How could they have covered their shorts on Friday with such low volume?

[qeternity]

Huge volumes trade off exchange in “upstairs” markets (blocks and dark pools). In a super volatile and absurdly illiquid at times market like GME recently, this is where the institutionals would do most of their trading.

If I needed to buy 1m shares of GME I wouldn’t do it in the open market. I would call my favorite sell side shop, let’s say Goldman and have them call Fidelity or similar to arrange a block trade.

[alextheparrot]

I think that post is representative of how only the market and time will actually flesh out this story. The GME holding party entrenches further because the graph is bad (Y Axis distortion) and the GME short party says the pressure has been alleviated.

[ajross]

> You don't spend money on ads saying "we no longer have a financial stake in this stock"

I don't think they did. The source of this meme seems to be a Twitter ad from CNBC that was teasing an interview with a quote to that effect. That's a CNBC ad selling their show, they don't take paid ads from their guests.

[easton]

This is not what happened, I don't know why people keep perpetuating it. The entire source of the "Melvin Capital has closed their positions" thing is an anchor on Squawk Box on Wednesday morning saying that he just got a call from Melvin's fund manager who said that Melvin closed. There hasn't been any other comment besides that one, which is why people think it may have been less than honest.

https://www.cnbc.com/2021/01/27/hedge-fund-targeted-by-reddi...

[fractionalhare]

The more compelling reason to believe they didn't lie about it is because we haven't heard they went bankrupt yet. We probably would have heard that it happened by now, and they certainly would have been bankrupt if they didn't get out of GME in the $100s.

[imtringued]

If you are already out you don't have to tell anyone. You simply have exited the market and stopped caring.

[jerry1979]

Also, it seems like "close my position" could mean anything. Does that phrase have any specific legal meaning? For example, if I own 1 share of GME, then that is my "position". If I buy another share of GME, then I have a new position: 2 shares of GME. I "closed" my first position, and opened a new one.

[Teever]

> they don't take paid ads from their guests.

How do you know this?

[ajross]

They sell journalism under the NBC brand. Is this a serious question? If CNBC was issuing paid advertisement like that it would be a much, much bigger story than a spike in a small cap retail stock.

[elif]

NBC has double the primetime product placement of it's next nearest competitor, fox.

https://ufdc.ufl.edu/UF00101603/00001

[ajross]

That's about fictional TV shows, not news.

[sschueller]

Only a small segment during the 247 news station day is actually designated as news. Everything else is news entertainment which has different regulations.

[fractionalhare]

> Considering this is a hedge fund, I just assume they're lying because, you know, it's a fucking hedge fund.

If this is your prior for approaching evidence, you're always going to catch big finance lying. But not because you're actually calibrated on evidence. And you won't be able to distinguish between actual fraud and baseless conspiracy.

[kshacker]

Well this has been going around on the reddits today. See for yourself: https://www.youtube.com/watch?v=gMShFx5rThI

> Says Cramer: What's important when you're in that hedgefund mode, is to not do anything remotely truthful, because the truth is so against your view, so its important to CREATE A NEW TRUTH to develop a fiction...the great thing about the market is it has absolutely nothing to do with the actual stocks

[vmception]

quite a bit has changed since 2006, specifically in the financial reform bill of 2010 and the jobs act of 2012

not a lot, but a bit

circulating a clip from 2006 as your only insight into the hedge fund world just proves all the talking heads right about retail traders being a joke.

[protastus]

> quite a bit has changed since 2006, specifically in the financial reform bill of 2010 and the jobs act of 2012

> not a lot, but a bit

I don't know who you could persuade with such lack of conviction...

[vmception]

it was mainly to satisfy pedantic financial professionals passing by but I can see how that is not reconcilable for pedantic software engineers at the same time

[flunhat]

You should consider at least editing this post given that it has a massive inaccuracy in it, i.e. that Melvin Capital bought ads to communicate not having a position in GME. That was CNBC.

[drcross]

I'll double down for you and it will really melt you brain- they paid Ars in this article to say they have covered their shorts.

To think hedge funds wouldnt do such a thing when so much is riding on this, is extremely naive.

[fractionalhare]

With respect, you haven't thought this through. Given there is "so much riding on this", why do you think a hedge fund would concoct a nefarious, extremely uncertain scheme to get people to think they closed instead of actually closing?

You agree they're motivated by money, right? They would have lost literally all their money, even with the additional investment, if they were still in when GME soared to $400. They would also be aware of that fact.

[bluGill]

Because closing their position is not what any sane shorter wants to do. The bottom line of GameStop sucks baddly. Anyone who can add to their shorts stands to make a fortune in a few months after this all calms down.

Though they might have seen what was happening and exited at 50 to reenter at 300. That would be incredible foresight.

[qeternity]

Why do you think short squeezes happen? It’s not because shorts are being insane and covering. They are literally forced to. You have buying for reasons that aren’t commercial and that’s why short squeezes are so bloody.

[bluGill]

They are forced to because the lender of the stocks is afraid that they don't have enough money to buy back if things go even higher. If you can prove you have enough money at current prices then you are not forced to sell. GME is not a big company, even at current prices there are several funds that could afford to have a significant short interest from the bottom without getting a call.

edit: originially I said they could carry 200% short, but that is not true. The biggest funds I can find could alone have shorted 30% of a GME at $3 and be okay at $300, but going much above that price or percentage of GME shorted would be a problem.

[drcross]

These are naked shorts, more shares are shorted in GME than exist in the company.

[drcross]

>why do you think a hedge fund would concoct a nefarious, extremely uncertain scheme to get people to think they closed instead of actually closing?

Because they haven't closed their positions, and that information would tip shareholders into thinking they might release some profit before the price levels out.

>They would have lost literally all their money, even with the additional investment, if they were still in when GME soared to $400

No. Not if their positions haven't closed.

If you really think this through, why would they actually announce they have covered the shorts instead of simply reclaiming a short position?

[flunhat]

> If you really think this through, why would they actually announce they have covered the shorts instead of simply reclaiming a short position?

This is paper thin logic. If they hadn’t said anything publicly, you and others would be commenting, “See! Melvin Capital hasn’t said anything, so they’re still shorting GME.” It is incredibly common for investors involved in public battles over a stock to announce they’ve closed a position, see Bill Ackman and Herbalife (https://www.investopedia.com/news/billionaire-bill-ackman-du...)

[aardvarkr]

I mean, the obvious play is to short the stock now. Advertising that they're out helps cool the temperature of the storm so they're hoping to capture some value on the way down is my guess.

[londons_explore]

> The general assumption on WSB is that Melvin Capital is lying

If a company issues a commercial press release that turns out to be a deliberate lie, doesn't that usually result in prison time for someone?

Were there ambiguities in the statement?

[AtheistOfFail]

Fines... Which won't matter if the company's bankrupt

[pb7]

Can you link to this press release?

[Swannie]

If you've watched the big short, you'll understand that the challenge with a short is the timing. You have to get the timing right.

For Melvin Capital, they were right, until they were not - when WSB showed up. They have eaten a loss on this.

But that doesn't mean to say that someone else was not willing to buy their shorts, for a hefty discount, with a significantly longer term time frame strategy (because they don't have to borrow on margin), believing that once it becomes clear that Melvin are out, that Redditors will want out of GME, and GME will likely crash back to something close to its prior levels.

[m3kw9]

Given they lost 53 percent that does indicate the direction they closed a lot of it.

[kshacker]

I am more interested to know if they closed a lot the day many brokers blocked buying shares? ... so all the buys could have gone to Melvin at a price under 200 rather than over 300.

[m3kw9]

You would be sure they would try to close as much as they need during that big dip

[twistedpair]

Short interest numbers are published on the 15th and 31st of the month. We'll get a look to day on how the shorts have changed over the last 2 weeks.