In full disclosure, Foreclosurepedia is a member of the Reddit group, r/wallstreetbets which has been somewhat responsible for the GameStop, et al., financial news cycle lately. With virtually every media pundit falling all over themselves about how President Biden is better than sliced bread, how his Administration is treating Main Street, whom recently took down Wall Street vis-à-vis #GameStop is proving to be the yardarm measuring lobbyist influence. Bloomberg Quint had this to say about the fiasco,
The watchful eye of government may have been part of the reason why the trading app, Robinhood Markets, decided on Thursday morning to limit customers to selling their existing positions in certain volatile stocks rather than continuing to let them buy. The rage on social media generated by that decision shows that the private sector making decisions to rein in market excess has its costs, too. Once a bubble gets to a certain point, rage seems inevitable, the only question being whether it happens after the bubble bursts or before, when companies take steps to protect their customers and themselves.
And further coming off the rails, Citron, a firm whom lost their shirt and with a 20 year storied history of publishing short recommendations, bowed out of the market obviously sensing that where there is smoke, there will ultimately be fire. Covering up the tracks is going to be difficult, at best, though. Within hours of Robinhood’s shutting down of its user’s ability to trade GameStock and other shares, a federal class action lawsuit was mounted.
Litigation filed in the Southern District of New York stated that Robinhood “purposefully, willfully, and knowingly removing the stock ‘GME’ from its trading platform in the midst of an unprecedented stock rise, thereby deprived [sic] retail investors of the ability to invest in the open-market and manipulating the open-market.”
Those are the pesky little things that hedge funds and their lap dogs fail to realize: Litigation and the Media are two way streets. See, remember how Citron stated they were getting out of the shorts reporting? Yeah, they lost everything. Citadel pays Robinhood for order flow. Citadel gets to see Robinhood’s orders a few milliseconds before they’re filled. Citadel may choose to front-run some of those trades. Citadel and Point72 lost at least $3 Billion. D1 Capital Partners lost roughly 20% which is about $4 Billion. Another fund, the $3.5 billion Maplelane Capital, lost about 33% this month through Tuesday in part because of a short position on GameStop, according to investors.
Here is what Robinhood had to say, in part,
Starting tomorrow, we plan to allow limited buys of these securities. We’ll continue to monitor the situation and may make adjustments as needed. To be clear, this was a risk-management decision, and was not made on the direction of the market makers we route to.
Really? So, let’s see here for just a moment. Citadel, whom pays ungodly amounts of money to Robinhood, began losing their shirt in the trades. All told, Citadel and others are down nearly $6 Billion, with yet another $11 Billion at stake. All told, [s]hort-selling hedge funds have suffered a mark-to-market loss of $19.75 billion year to date in the brick-and-mortar video game retailer, including a nearly $8 billion loss on Friday as the stock kept ripping higher, according to data from S3 Partners. The astronomical rally in GameStop has imposed huge losses of nearly $20 billion for short sellers this month, but they are not budging.
With respect to the GameStop feeding frenzy, it was poignant that Alexis Ohanian, Reddit’s co-founder, had this to say on Bloomberg,
“This is something, I think, for a lot of people, that was a statement as much as an investment,” Ohanian, who left Reddit’s board last year, said on Bloomberg Television on Thursday. “I’d equate it to, like, folks voting with their dollars in order to get back at or make a statement towards big finance.”
The importance of this statement is of the highest magnitude within the Mortgage Field Services Industry. First, relate the use of money here, to the acceptance or rejection of work orders. Second, the daily banter both here on Foreclosurepedia as well as throughout the social media sphere now gives cause to National Association of Mortgage Field Services (NAMFS) members to pay attention.
How the GameStop saga will end is anyone’s guess. Currently — and I submit illegally — day traders running through Robinhood, et al., are shut down so that the hedge fund corporate masters can rally the funds needed for the long haul. What Robinhood, et al., cannot do is force the Redditors to sell their positions and from the looks of things in the r/wallstreetbets it looks like the line will be held for the foreseeable future.