… and they became Lions!!!
Almost seven years after the shorts attack on GOWEX, those who won then, now lose after the reaction of the small investors. David vs. Goliath.
When a company like GOWEX with more than $2.4Billion market cap, or any other endures a hedge fund short seller attack, it is as if it were attacked by a wolves crow. The short sellers act like this. They show their fangs for weeks and months before cornering their prey. What they do with it is signal their target. The smell of fear is noticeable in the environment and if they have enough buddies, they attack. They don’t want to take unnecessary risks, attacking when they know they can win by taking a bloodbath. I am going to tell you, how a company is attacked and I tell you that I have suffered in past experience.
“ I am going to tell you, how a company is attacked and I tell you that I have suffered.”
How do the shorts act? The procedure is quite technical. A short sellerr takes shares of a certain company listed on loan, with them in his account, sells them and already gets an income of 100 Euros, for example. Usually they have discovered information that the market does not have: it could be a breach of an important contract, a false account, an overly optimistic valuation or forecasting and already reflected in the price. Once they are sold at those 100 Euros, he publishes a report with all the negatives found (even if is not true) in the company; first to the rest of the members of the pack, so that they follow him in the attack on their prey and then he publishes it to the market in general. In this way, the stock falls out of favor, not only because of the data that appears, but also because the price tends to fall meteorically and that feeds the credibility of the information. The price continues to fall and let’s say it falls by 65%, as happened in the case of GOWEX, because then the wolf begins to buy the share that it had previously sold, thus with a price of 35 Euros, it buys back, to return it to the stock lender. Gain of +100–35 = 65 euros.
In the case of GOWEX, the wolves wanted the share to reach a price of 0 Euros. Having borrowed it at 20 euros, it fell to 7.50 euros on the first day. The profit was 62.5%. They destroyed shareholder value of more than 1.2 billion euros.
In the case that we are showing these days, the company attacked is GAME STOP. A game salestore chain, which in the face of the setback received by the closures and changes in trends in customers who have gone from buying in stores to buying games directly in the comfort and safety of your own home, was a perfect lamb for wolves of the shortsellers, give a good account of it. In this way, what they did was borrow those titles from GME (the acronym or Tiker for GAME STOP), selling them to the market and making it fall.
The shortsellers considered that they were facing a unique occasion and $ GME decided that they could be facing a “Zero”. What is a “Zero”? The shaes without intrinsic value, are the most interesting ones for the shorts, because they can disappear and not have to return the borrowed titles (they are the wettest dream that a short can have). When this happens, their bets are usually “All in”. There are even funds specialized in this hunt, they are the so-called Zero Hunter. Gotham City Research, the alpha wolf from the attack on GOWEX, was a Zero Hunter.
When a bloodthirsty wolf attacks, he has no respects, he knows that no matter how bad the play goes, he already has other wolves that are going to follow him, otherwise he would not enter. So he rushes in and unceremoniously, he begins to borrow the shares of the sheep that he wants to devour. In this way, he gets to borrow shares, even above the number of shares that are currently on free float market. In other words, the owners of those shares lend them and not only theirs, but those they get from investment banks. In the case of GME, they have managed to borrow unil 130% of the available shares. That is, more shares than available.
When Citron Research, one of the short sellers that attacked GME, declared that their target was GME, the GAME STOP executives were sweating blood in terror with an attack as fierce as the one they were preparing. Before that, the shorts had contacted some media to gradually dose in pils their information, which was true or unreal, had not been communicated to the regulatory authority SEC (stock market bodywacth in USA) or to the prosecution or even to the Auditors, so that would then enforce the Law, but rather that and with the objective that the share price is not suspended, they always kept it outside of that orbit of those legal bodies. For them, the objective is to tear the company apart, bring it down, and if the regulator or the police see fraud in any aspect, the market activity is suspended. On many occasions, the information is obtained from employees, Directors or even the General Directors of the company. Many times in an suspected way. That makes them run away from legal channels to report the existence of problems in the company.
But wait. You are you telling me that shorts sellers are illegal? No, shorts sellers are not illegal, but as usual, they have an advantage over other investors. Yes, you who are reading me, you cannot access all that information. You are a retail small investor and normally you bet on a company because of what you know or what the general public knows. You don’t have the same opportunities. You are a small investor and you are here to pay for the parties you saw at the Wolf of Wall Street. So, when a stock falls 60% of its value in one day, it is usually the retail investor who gets caught. The big bank, the big investors, are the next ones to whom the shorts sellers send their reports and if necessary, or almost always, they call them by phone to support them with a quick session of resolution of doubts and that they change by starting to follow to the pack. After all, on many occasions, shorts need the big ones to make their movements profitable. So the little one is alone again.
“You are a small investor and you are here to pay for the parties you saw at the Wolf of Wall Street.”
But, all of a sudden, what all of us who like Braveheart dream happened in these markets once and for all. The small shareholders, united, go out to the attack of the short speculators. Incredible but true. Small shareholders united spontaneously and supported by chat and channels on Reditt (a network of miniblogs, similar to Twitter, but with fewer drunks), are beginning to organize.
"How do you say? that this stock is more than 100% short of available stocks. Damn that is being very unfortunate"
"These are crazy, it turns out that to borrow the shares, you have to pay 30% interest. These shorts sellers go without a helmet and can screw it up"
"Well, it is about time that we settle and is payback with all the times that they have made us lose"
These sentences on retail investors channels, made the bet run like wildfire for everyone to join in buying that stock in which short sellers had set out to crush. But those short boys had been overly arrogant and greedy and had made the mistake of coming in late on the brakes.
They began, the retail shareholders, led by a not very large number of free men to buy the $GME share and that share began to rise and the first skirmishes, made the small crows, little by little, coming from all parts of the earth of freedom, of the United States of America, began to join forces against the invader, the wolf, the murderer who wanted to destroy a company of stores in which they had all bought their video games at some point and little by little, the Wolf armed to the teeth, he began to get more and more pissed off, selling more shares short, going with everything and more, because his arrogance made him see that he could not allow those villagers to get away with it and as shepherds , rescue that lamb that he already knew should be between their jaws.
Soon, the retail investors felt stronger and stronger and began to call more proud shepherds to save the company and $GME began to rise 100% and the next day more than 200%, so they always lost, they began to realize that they could win. More than 400% and in less than a week, they collected gains of more than 1,200%. Some had put in $ 10,000 and already had more than $ 120,000 in profit. They were great, Yes !!!!!
“Some had put in $ 10,000 and already had more than $ 120,000 in profit. They were great, Yes !!!!!”
Those wolfs, didn´t spect that kind of defeat, and pounded with the hit, their proud wouldnt remain like that, so they start making the required calls…
This articule, was originally publish on slog.media
You can contact me on Twitter and Telegram: @jero_net
You can download my books on leanpub
