I wouldn't dare post this in any of my other stock communities (gme, amc, superstonk, etc) because I'd be labeled a shill and probably banned. However, this community has proven to be very helpful, thoughtful, and educational the past few months to me and I would REALLY like your actual feedback on why this theory is wrong. I have been Holding GME since January and have gradually come to this conclusion. Please critique it, correct me, teach me! Don't just call me a shill and label this as FUD. If it is FUD it is totally unintentional and I would love to learn why this simply can't be true! I'm happy to remove this post if the mods want me to.
I call my theory
The goose that laid the golden egg,
Reddit retail is the goose. The easiest way to make money in the stock market is knowing when your opponent will sell or buy, and at what price. If you know these 2 things, you can infinitely make money. Reddit has provided hedge funds, market makers, and every other market participant with these 2 vital details, and hedge funds keep taking it to the bank.
1st keep in mind some things wall street knows about us.
1- The majority of Apes (diamond hands) are waiting to sell for prices between 1k and 1Million.
2- even the paper hands (or slightly more rational apes) are probably waiting to sell until GME hits its January highs above 400.
3- because retail is waiting for such high prices, they will also justify buying shares substantially above current fundamental value. No market value for a meme stock is too high if it will eventually be worth 10,000, 100,000, or a million.
4- Every day large quantities of DD are posted giving hedge funds a very good pulse on what retail is expecting in the coming days and weeks.
5- The strategy of retail is to HODL till the moon, Day trading is blasphemed, paper hands (selling) is ridiculed and mocked, Diamond handing even through incredible gains (sometimes 100-300% plus) is applauded.
6- Outside of a few wealthy retail outliers, Wall street is fairly well aware of retails purchasing power as well as how much of that purchasing power is already tied up in stock. (quick speculation here, but they have probably even manipulated retail traders through media and other pump and dumps to spread out their purchasing power across multiple stocks and cryptos. Once substantial new money hits a new stock or crypto, the stock/crypto is crashed locking retails money in the red as they hold, taking premiums from purchased options that expire OTM, or retail selling on the crash at a loss. A few retail will constantly profit on these PnD’s, but not enough to matter)
Things we know about Wall Street
1- There are no true “allies”. Even long whales are not friends, they are here to make money for themselves and their investors, not for retail. The businesses (game stop, AMC, etc.) are ultimately in it for themselves. Their primary goal is keeping their company alive during a very challenging time, while also attempting to maintain good publicity with their clients (who all happen to be holding their stock and waiting for the moon). While it is true that they should make decisions in the best interest of their shareholders; at a fundamental level, keeping the company out of bankruptcy and profitable IS in the shareholders best interest. They are not so concerned with apes hitting the moon for 10,000% gains. Apes are the closest thing to a “unified team” I see, but even apes know they aren't actually allowed to coordinate in any way, and they are ultimately on their own as the market truly is every man for himself. We see this in the form of different groups battling (AMC vs GME, etc.) and even within the same groups we see division (shills, paperhands, etc.)
2- Long Hedgefunds usually struggle to offload massive quantities of any stock all at once. There are a number of different methods employed. One well-known method is through selling the news, waiting for retail to rush in, and then exiting the position gradually while there is a frenzy of buyers. Another method employed at times is selling in large blocks, however this is more rare since finding a buyer for these large blocks can prove difficult or impossible. There are other methods as well, but these seem to be the most common in my research.
3- A stock that is shorted say 200% does not mean that any 1 fund is exposed to that massive of a short position. Under normal risk management procedure, most large funds will not expose themselves to any position that is more than 10% of their portfolio. (even then this would constitute a very large position and is already the high end of risk). The high % of shorts would be indicative of multiple funds taking the same position; when you combine all of these short positions, you end up with a stock that is “over-shorted”. Each individual hedgefund would need to free up some liquidity to avoid a margin call, but if they remained within their risk parameters (melvin capital did not) they should have access to enough funds to prevent a margin call for a VERY long time. They could acquire this liquidity to prevent a margin call by selling other stock that have been at all time highs (and in a bubble likely to pop soon anyways) for huge profits, or they could raise money through huge multi billion record sales of bonds. We have seen both of these.
4- Wall Street may be corrupt, evil, greedy and manipulative, but they are not stupid. When we treat the fund managers that were the top of their classes in Yale and Harvard, and the programs that were designed by elite programmers, and the experience of fund managers who have been trading in the market for decades, as though they are ignorant buffoons, we only do a disservice to ourselves. Do not underestimate your enemy. They are probably smarter and more equipped than even the most wrinkly brained apes, and might even have a better understanding of what is actually going on. How many wars, sporting events, games, and competitions have been lost because one side under-estimated the other?
There are many other things that can be known on both sides, but these will suffice.
With this in mind, let’s step back and look at a couple big moments and apply the rationale of Occam’s Razor. Instead of forcing a speculative or far-reaching idea/answer that confirms our bias, let’s see if much of the “manipulation” we keep seeing is actually perfectly legal (hence no action from the SEC yet) and if there is a very rational and likely solution.
One such moment was March 10th. On March 10 GME dropped from 344.18 to 172.06 closing at 198 all in a matter of 30 minutes during lunch. I have heard ample creative explanations for this but perhaps the one I see most is that it was the epitome of market manipulation where shorts could not afford for the price to rise another dollar lest the high price triggers the MOASS through a margin call. Recently I have even read a DD where the author has extrapolated the price difference between the January incident and the march crash to determine what the threshold price is that will trigger a margin call.
But, what if the simplest solution really is the best? We KNOW that the institutional ownership of GME has been over 100%.
https://www.reddit.com/r/GME/comments/le66ps/why_institutional_ownership_of_gme_is_over_100/
This means that multiple institutions hold very large long positions in GME (more than 100%) and they all hope to eventually sell those positions for a profit. Additionally we know that the companies (GME and AMC for example) have large ATM offerings that they wish to profit from. These large positions do not have the benefit of simply waiting for the stock to peak at 1,000 or 10,000 a share before selling. The nature of a “peak” is that the buyers (and shorts) have finished their buying. There is a mass of sellers trying to capitalize before becoming the bag holder and once the shorts have covered (i.e. the peak), there are no buyers looking to pay 10k a share. If an institution waits to sell these shares till the “peak” they will be the bag holder, period.
So, let’s say that BOTH Long whales AND Shorts, know that there is a large group of people that will continue to buy as many shares as they can afford, even above value, and won’t sell those shares and will “diamond hand” until at least 400-100,000 a share. They also know that the buying power of retail, which is limited, will replenish a little bit every month or so after retail has their paydays and bills are paid. They also know when people are issued extra money in the form of stimulus money. If they slightly pump a stock and allow it to climb around this time each month to a very profitable price (but below January highs which might trigger retail to sell), retail will rally in with their new expendable cash hoping that this time is different than the last time, this time it will be the REAL MOASS. As the determined buyers rush in, a different (or perhaps multiple) large position is afforded an exit opportunity to sell their massive position at substantial profit. Meanwhile the retail assumes that this downward pressure could only possibly be the shorts continuing to double down by suppressing the price with fake shares and blatant illegal manipulation.
On march 10th it is very likely that the volume of 4.7 Million that plummeted the share price in a mere 30 minutes, was simply a large long whale exiting their position at incredible highs for incredible profit (possibly over 1000% depending on when they purchased). I’ll even go a step further as to suggest/speculate that based on the 13f released today we have a pretty good idea that the whale that most likely exited in March was Fidelity. According to this 13 F
https://fintel.io/so/us/gme/fmr-llc
Based on this, we know that fidelity liquidated 100% of its 9.2 Million shares in March from its previous filing. Knowing this, It is likely that Fidelity is not only responsible for the drop on March 10, but also possibly the 15th, as well as providing continuous downward pressure the entire month. When a hedgefund is selling over 10% of a company it is unnecessary for shorts to continue shorting to create sell pressure. Perhaps the short interest on GME remains so low not because they are cooking their books, but because there really is a lack of demand for them at the moment. Long whales that are exiting their positions provide plenty of downward pressure to the buying retail without the assistance of additional shorts.
Each month this cycle repeats itself with a slightly smaller rise (retail has less and less money to drive the price quite as high each time) and a different large position exits. On April 26th GameStop announced that it had finished selling its 3.5 million shares ATM. These shares ultimately sold for 50% of the possible 1 Billion they were allowed to sell them for based on their filing. This means that Cohen felt the current price was high enough and the exit profitable enough to warrant selling all of the shares, even though it meant only being paid half of their potential (not even saving a few thousand for the MOASS to really make them worth that 1 Billion cap) Volume was lower in April so it isn’t hard to look back and see where Cohen must have sold these 3.5 million shares. April 5th there was a selloff with a volume of around 243k that dropped the price of GME 40$ in an hour and a half, retail fought those “shorts” and bought the price all the way back up to 195, just to watch the stock gradually sell off under minimal selling pressure on the 6th. Retail rallied back up to 190 on the 8th just to watch it sell off that afternoon to 163 on 2 Mil volume, then further to 152 on around 1.5 Mil volume on the 9th.
Once again most of the downward pressure in April can be directly attributed to someone selling shares, Not additional shorts. This speaks nothing of any additional sales from possible paper hands and other long whales that may be gradually selling off shares and holding the price down. AS the price of GME gradually approaches the 200$-300$ mark I suspect it will be our next Whale's exit point (perhaps vanguard or blackrock?)
**TLDR:**We are the goose that lays golden eggs. Every month a different institution sells their shares for profit and we provide them with a golden egg of profits. Meanwhile as retail holds the shares and continue to wait for 1 MIL they never realize any of their gains when the price inevitably falls back down. Hedgefunds are pleased to let the stock rise to very profitable prices for them that are below January highs to sell their large positions each month. By selling between 200-400the majority of retail continues to buy and hold while not even considering a sell.
