GameStop stock madness: Investors wonder who’s really manipulating the market

This idea was not far-fetched. For two weeks, Gill has been posting photos of a massive stake in GameStop and its call options in a portfolio that peaked at more than $550 million on June 6. Although he has added more shares since then, the dollar value of his stock and his holdings with company stock have declined.

With the stock having changed little since its early days Latest crazeA new kind of anxiety is growing among Wall Street and retail traders alike.

The original GameStop rally of 2021 shook the idea of ​​short selling to its core — eroding the appeal of betting against a struggling company when you end up feeling the wrath of Redditors. This time, the existential question is about what constitutes market manipulation.

Did you post a Mimi, which is likely to make an immediate profit, violates the spirit of free and fair markets? Has the David versus Goliath nature of meme stocks changed? What if they floated kitty He is Goliath? How exactly did he build a position larger than that of Charles Schwab?

“The original meme stock craze was us versus them, where ‘them’ were the people shorting millennial-favorite companies like GameStop,” said Steve Sosnick, chief strategist at Interactive Brokers. “But I’m not sure who they are anymore.”

Gill did not respond to a request for comment.

Loss of magic

The leader of the populist short squeeze group that rocked Wall Street in the original meme stock rally of 2021, Gill is losing his populist charm, at least for some followers. Brands and even some former fans view Jill with more suspicion, with Redditors asking questions like: “How to Come Back Roaring Kitty is not a basic pump-and-dump scheme?

By Thursday, snapshots of Gill’s brokerage account indicated that he had unwinded an earlier position of 120,000 call options and added more GameStop, bringing his portfolio to about 9 million shares of the video game retailer, worth more than $262 million. (Gill’s last posting of 2021 showed he had 200,000 shares worth more than $30 million; GameStop did a four-for-one stock split in July 2022.)

As Gill’s actions sent prices soaring again, GameStop took advantage of the volatility to sell off more than $2 billion worth of shares.

Finally, anyone who bought stocks within the past month and held them was just as likely to lose money as to gain. For some, one key difference is that hedge funds and other sophisticated investors have adapted for three years and are likely to get ahead — to the detriment of retail trading enthusiasts for a generation.

“Some quantitative managers have models to look at price trends, and those models are very quick to exit a stock if they see significant downward swings,” said Don Steinbrugge, CEO of Agecroft Partners, which helps hedge funds. Collect money. “At some point, retail investors will wise up and realize there is significant risk.”

Manipulation concerns

This incident has highlighted questions about what constitutes market manipulation. The Wall Street Journal reported that Morgan Stanley-owned brokerage E*Trade was considering banning Jill from using its platform over such concerns, having previously banned other famous figures such as Dave Portnoy, the founder of Barstool Sports who broadcasts as Davey Day Trader and said he He was fired from the brokerage.

An E*Trade spokesman declined to comment.

What’s unique about Gill’s case is that market manipulation typically involves pushing the price higher to take advantage of a stock’s movement, said Craig Marcus, a partner and co-head of the capital markets group at law firm Ropes & Gray. He said that if Jill’s footage was real, that was clearly not the case.

“You can disagree with his thesis about the value of a stock, but if all he does is implement his thesis and not do manipulative things to make a profit,” Marcus said in an interview, “it’s hard to prove bad faith.”

Granted, Gill was accused of using his influence to manipulate prices even three years ago when he first came into public view. In 2021, a lawsuit against Gill and MassMutual alleged that he was manipulating the markets through his outsized influence over certain stocks.

Read more: MassMutual Acquires ‘Roaring Kitty’ Market Manipulation Suit.

“Three years ago this would have been laughable,” said Peter Atwater, an assistant professor of economics at the University of William & Mary. “People are becoming more upset by this than amused by it, and that to me is an indication that this behavior is unlikely to be allowed to continue.”

When Gill made his highly anticipated return to YouTube on June 6 without details of what he would talk about, the stock rose nearly 50%, adding $16 billion to its market value within hours.

In the live broadcast, which garnered hundreds of thousands of viewers, Gill spoke for nearly an hour against the backdrop of the wild volatility of GameStop’s stock price. He seemed to feel he could get more scrutiny from fans, regulators and trading professionals.

“Should I be careful what I say here?” Asked.