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    Briefing Note - GameStop Short

    Uploaded by

    Josh Taylor
    The document outlines the events of the January 2021 GameStop short squeeze. It began when social media users on Reddit encouraged each other to buy GameStop stock to drive up the price and squeeze short sellers who had heavily bet against the company. This led GameStop's stock price to increase over 1,700% in a few weeks, costing short sellers over $5 billion. The short squeeze was influenced by Ryan Cohen joining GameStop's board, the high short interest in the stock, a small amount of shares available to trade, and the social media campaign. Online brokerages later restricted trading in GameStop, causing its price to fall sharply.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Briefing Note - GameStop Short

    Uploaded by

    Josh Taylor
    28K views3 pages
    The document outlines the events of the January 2021 GameStop short squeeze. It began when social media users on Reddit encouraged each other to buy GameStop stock to drive up the price and squeeze short sellers who had heavily bet against the company. This led GameStop's stock price to increase over 1,700% in a few weeks, costing short sellers over $5 billion. The short squeeze was influenced by Ryan Cohen joining GameStop's board, the high short interest in the stock, a small amount of shares available to trade, and the social media campaign. Online brokerages later restricted trading in GameStop, causing its price to fall sharply.

    Original Description:

    An ASIC briefing note on GameStop

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    The document outlines the events of the January 2021 GameStop short squeeze. It began when social media users on Reddit encouraged each other to buy GameStop stock to drive up the price and squeeze short sellers who had heavily bet against the company. This led GameStop's stock price to increase over 1,700% in a few weeks, costing short sellers over $5 billion. The short squeeze was influenced by Ryan Cohen joining GameStop's board, the high short interest in the stock, a small amount of shares available to trade, and the social media campaign. Online brokerages later restricted trading in GameStop, causing its price to fall sharply.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    28K views3 pages

    Briefing Note - GameStop Short

    Uploaded by

    Josh Taylor
    The document outlines the events of the January 2021 GameStop short squeeze. It began when social media users on Reddit encouraged each other to buy GameStop stock to drive up the price and squeeze short sellers who had heavily bet against the company. This led GameStop's stock price to increase over 1,700% in a few weeks, costing short sellers over $5 billion. The short squeeze was influenced by Ryan Cohen joining GameStop's board, the high short interest in the stock, a small amount of shares available to trade, and the social media campaign. Online brokerages later restricted trading in GameStop, causing its price to fall sharply.

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    © All Rights Reserved
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    OFFICIAL: Sensitive

    Event timeline: GameStop short squeeze


    29 January 2021

    This note outlines the events of the January 2021 GamesStop “short squeeze”.

    Background
    1. GameStop (GME) is an American brick and mortar video game retailer. Institutional
    investors had heavily shorted GME, believing that it would not survive the economic
    impacts of COVID-19.

    2. From 11 January to 27 January, GME’s share price rose by 1,727% as a result of a mass
    social media short squeeze campaign. Costs to short sellers currently exceed $5 billion.

    3. The short squeeze was influenced by 4 key factors:

    a. Positive changes in GME’s strategy and management due to the engagement


    of Ryan Cohen (a billionaire e-commerce venture capitalist);

    b. GME’s high short to float ratio – 71.2 million shorts against a float of 69.75 million
    shares;

    c. GME’s high proportion of insider investors resulting in a small amount of tradeable


    stock - only 23 million tradeable shares; and

    d. Users of r/WallStreetBets posting about the opportunity for a short squeeze and
    acquiring GME shares en masse.

    GameStop share price ($USD)


    $350
    $300
    $250
    $200
    $150
    $100
    $50
    $0
    Aug-2020 Sep-2020 Oct-2020 Nov-2020 Dec-2020 Jan-2021

    Event timeline
    September 2019  GME reports a 14.3% drop in quarterly sales and commits to
    Share Price: act “with a sense of urgency” to address failing areas of its
    ~$16.00 USD business
     A WallStreetBets user (DFV) posts about buying $50,000 worth
    of GME call options and is mocked by other users

    August 2020  GME’s share price reaches an all-time low


    ~$5.00 USD  Ryan Cohen starts acquiring GME shares

    OFFICIAL: Sensitive
    21 September  GME’s share price rises as Ryan Cohen reveals that he has
    2020 been in contact with GME management and plans to
    $8.75 USD transform GME into an Amazon competitor.

    8 October 2020  GME’s share price increases following the announcement of a


    $13.49 USD strategic digital partnership with Microsoft

    November 2020  Ryan Cohen starts an activist investors campaign, publicly


    ~$12.00 USD questioning the ability of GME management to implement a
    new e-commerce strategy

    December 2020  Ryan Cohen now owns approximately 13% of GME shares
    ~$17.00 USD  GME falls short of Wall Street estimates for quarterly revenue
    11 January 2021  Ryan Cohen acquires 3 seats on the GME board by investor
    $19.94 USD demand
     GME states that it will focus on its transition into e-commerce
     Institutional investors acquire more shorts to defend their
    position (including Melvin Capital and Citron).
     GME shorts reach approximately 71 million. GME’s float is 69.75
    million shares, with only 23 million stocks being actively traded.

    13 January 2021  Investors from Reddit rush into GME, praising Cohen’s arrival
    $31.40 USD and calling on each other to squeeze short sellers.
     GME’s share price rise continues
    21 January 2021  Andrew Left, managing partner of Citron, issues a negative
    $43.03 USD analysis of GME on social media, claiming the price will fall to
    $20 USD.
     The anti-shorter movement gains support on Reddit
     r/WallStreetBets members express glee at ‘trolling’ Wall Street
    25 January 2021  Melvin Capital announces that it has received a $2.8billion
    $76.79 USD USD bail out

    26 January 2021  Melvin Capital close their shorting position at an undisclosed


    $147.98 USD loss.

    27 January 2021  Citron close their shorting position “at a loss of 100%”
    $347.51 USD  Elon Musk tweets about the GME short squeeze, causing prices
    to surge another 157%
     DFV, who has been supporting the short squeeze movement
    on WallStreetBets, claims their investment is now worth $47
    million USD.

    28 January 2021  r/WallStreetBets is briefly privatised as moderators attempt to


    $193.60 USD cope with new traffic to the site. Over 5 million people are now
    members of the forum.
     Moderators of the Australian forum, r/ASX_Bets, state that they
    will ban any user attempting to organise any type of ‘market
    play’
     Robinhood and other online brokerages restrict trading in
    GME, causing the share price to lose half its value
     A class action suit is filed against Robinhood

    2
    OFFICIAL: Sensitive
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    OFFICIAL: Sensitive

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