Factbox: Fun facts from the U.S. SEC report on January’s GameStop saga
A GameStop retailer is seen within the Jackson Heights neighborhood of New York Metropolis, New York, U.S. January 27, 2021. Image taken January 27, 2021. REUTERS/Nick Zieminski/File Picture
Oct 18 (Reuters) – The U.S. securities regulator launched its long-awaited autopsy into January’s , by which retail merchants banded collectively on social media and piled in to GameStop and different “meme” shares in an try and punish hedge funds that had guess towards the corporate, sending its shares hovering.
Whereas the episode was explored in some element throughout a earlier this 12 months, the Securities and Alternate Fee report, revealed on Monday, presents some new particulars on what went down. Listed here are some takeaways:
880,000 NEW ACCOUNTS STARTED TRADING GAMESTOP IN JANUARY
“GameStop had already began to obtain consideration on Reddit in 2019, together with in discussions about brief squeezes. That focus grew all through 2020,” the SEC stated.
“Value will increase, buying and selling curiosity, and social media curiosity all accelerated in 2021.”
By Jan. 27, the variety of distinctive accounts buying and selling GameStop on a given day had reached 900,000 in contrast with 10,000 at first of the month, the SEC stated.
INSTITUTIONAL INVESTORS ALSO DROVE THE RALLY
Along with retail buyers, institutional buyers, together with a number of hedge funds, additionally bought shares of GameStop Corp .
A few of these purchases could have been partly pushed by hedge funds that had betted towards GameStop, making an attempt to cowl their positions, and a few of these funds made dangerous losses.
In distinction, some funds that had been lengthy GameStop cashed in.
“Some buyers that had been invested within the goal shares previous to the market occasions benefited unexpectedly from the worth rises, whereas others, together with quantitative and high-frequency hedge funds, joined the market rally to commerce profitably,” the SEC wrote.
NO ‘GAMMA SQUEEZE’
One idea for GameStop’s meteoric rise was a so-called gamma squeeze, which occurs when market makers buy a inventory to hedge the chance created by writing name choices on that inventory. That, in flip, places much more upward stress on the inventory worth.
The SEC did discover that GameStop choices buying and selling quantity by retail buyers elevated considerably, however that was largely pushed by a rise within the shopping for of put, moderately than name, choices. The info additionally confirmed that market-makers had been shopping for, moderately than writing, name choices.
“These observations by themselves aren’t per a gamma squeeze,” the SEC wrote.
NO NAKED SHORTING
The unusually great amount of brief promoting in GameStop sparked hypothesis of “bare” shorting – promoting shares with out arranging to borrow the underlying safety.
When a unadorned brief sale happens, the vendor fails to ship the securities to the client. “Based mostly on the workers’s evaluate of the accessible knowledge, (GameStop) didn’t expertise persistent fails to ship,” the SEC stated.
IT WASN’T ALL ABOUT GAMESTOP
By early 2021, particular person buyers had been more and more downloading broker-dealer apps and greater than 100 shares skilled massive worth strikes or elevated buying and selling quantity that considerably exceeded the broader market, the SEC stated.
For instance, single-day worth modifications on Jan. 27 from the closing costs on Jan. 26 for KOSS Company (480.0%), AMC Leisure Holdings Inc (301.2%), Bare Model Group (252.3%) and Categorical Inc (214.1%) had been bigger than any single-day GameStop worth change, in keeping with the SEC.
Reporting by Michelle Value in Washington
Enhancing by Matthew Lewis
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