On CNBC’s Fast Money last week, anchor Melissa Lee appeared to mention the unmentionable. She was talking with Tim Seymour, CEO of Seymour Asset Management, who made offhand mention of the hedge funds shorting now-infamous stocks like AMC and GameStop. “Look, there are a lot of short sellers out there who have been borrowing stock they didn’t have,” Seymour said.
“Naked shorts, yeah,” said Lee.
You could almost hear a reverse record-scratch over the airwaves. Did a CNBC anchor really say that out loud?
The clip went viral. YouTube exploded with videos with titles like, “CNBC Just ADMITTED Naked Shorts On AMC!” and “CNBC just revealed GME and AMC are illegally naked short sold!” The frolicsome community of retail investors and activists who call themselves “Apes” and hang out in online forums like r/Superstonk and r/wallstreetbets, and who’ve placed the battle over the prices of stocks like AMC and GameStop at the center of one of the more interesting American culture-war developments in decades, rejoiced as one. Here was a representative of CNBC, a frontline agent of the financial establishment, admitting that the hedge funds they’re fighting have been cheating!
The financial press has been on a crusade to keep the GameStop phenomenon out of the front pages since it burst uninvited into the news cycle like flaming shit-comet earlier this year. “Forget GameStop” headlines have become one of the year’s most unstoppable journalism clichés:
GameStop, worth under $5 a share a year ago, rose to an incredible $347.51 on January 27th. The rally was reportedly caused by ordinary folk driven by a thirst for revenge against the financial system, who delighted in conquering billionaire hedge funds who’d put themselves in compromising positions by betting too heavily (and too publicly) against companies like GameStop.
When a fund called Melvin Capital was forced to close out its position in GameStop at a cost of nearly $3 billion, and mainstream mouthpieces ranging from Andrew Ross Sorkin to Nancy Pelosi rushed on TV to express horror and “concern” about what one economist called “a flash mob with money,” there were howls of triumph across the Internet. For a hot second, it looked like a bunch of kids with E*Trade and Robinhood accounts were about to go on an extended brain-eating rampage through the top tax bracket, and the specter of a gang of billionaire gamblers being crushed at their own game was poised to become the funniest thing to happen to the United States since the Gerald Ford presidency.
In an instant, it was over. On January 29th, the Robinhood platform, through which much of the GME buying took place, halted trading in GME under pressure from the Depository Trust Clearing Corporation, the shadowy colossus created in 1973 to centralize the settlement of stock trades. Shares in GameStop plunged from $325 to $53 in a matter of days, inspiring much of Wall Street’s community of Smart People to turn noses skyward as they declared “l’affaire GameStop” dead. Famed “angry investor” and real-life Gordon Gekko Dan Loeb described GameStop as “no different than other manias over time, going back to the Dutch Tulip Bulb Mania in the 17th century.”
“The short squeeze,” agreed Dealbreaker, “is no more.”
The shutdown of trading in GME looked from the outside like the financial community circling wagons in a blatant play to protect their own, and it seemed for a time like the Loebs of the world were going to be right: GameStop was just one of a long line of fleeting manias, whose backers in this case gained nothing but the satisfaction of having moved a few rich jerks to an amusing public freakout. Even that was worth something, but how much, really?
Then, a funny thing happened. The stocks came back. By Friday, June 4th, the day of Lee’s CNBC broadcast, GameStop closed at $248.36, on its way to a high of $337.36 this past Tuesday, not far off the $347.51 it reached at the peak of its news-cyclone earlier this year. As of this writing, it’s up 159% this past month. AMC, meanwhile, was at $49.34 on June 4th, headed past $55.00 this week, up a staggering 406% in just this month. A series of other meme stocks are also rising again, triggering a round of defections within the financial community, as business leaders began inviting the apes over the wall.
Ultimately, it doesn’t matter who’s behind the mercurial surges of stocks like GME. Either way, the chaos is exposing Wall Street for the preposterous collection of circus acts it’s always been, with the naked shorting issue being just one example.
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