It’s a Brave New World! From now on, forget reading financial sites, checking out financial youtubers and all other things you used to do in the past as a responsible private investor…Reddit investing is the way forward!
Yes, WE will show those shorting hyena’s who’s boss now!
Oh wait, what do you mean trading suspended?
The whole Gamestop soap is very entertaining, but I do hope new investors will realize that a Reddit stream is not a license to print money. Just because a share is shortened, is no guarantee it will explode within the next week. I owned some stock in 2019 that was shortened up the wazoo, and stayed in it. From a purchase at about 27 euro, stayed long while the shorters chopped it to 15, kept believing, and sold when I had about 4% profit, because I HAD ENOUGH. I wanted my money to work, not stay forever in a stock that was clearly manipulated. Of course, three months later, it peaked at 45 or something like that. And currently it is at 58. I could have made much more money, so much more!
But it also could have stayed at 15, 16 for much longer. If you count on the short squeeze, it can be a long, long wait. If you think you might need that money within a year…well, you shouldn’t invest in anything then really. But definitely not try and play with shorters.
As a rule, by the time this sort of news gets to the mainstream, the real profit has been taken, and the crowd is running behind the bandwagon, tries to jump on, and usually trips and end up with scraped knees and a bloody nose. So I figured if my first thought was to find out what the second most shortened share was, I was to late, So let’s take a look:
Let’s start with Ligand Pharmaceuticals Inc (LGND)
So how about anothershortend stock, Bed Bath & Beyond Inc (BBBY)?
So, clearly some people paid attention, and made some nice money here. But the next Gamestop? No doubt, the big financial players will take measures to prevent this from happening again, and it seems like a logical and good thing if shares can not become shortened to this extend ever again. It will be very interesting to see how any legal action against Robinhood and maybe other parties will go. There is no such thing as a free lunch, or a free stockbroker, so in my personal opinion, it is good that this has been shown clearly now. I believe investing should be done by researching first and with a calculated amount of risk, tailored to your personal financial situation. Running with the wolves can be exiting, but when investing is exiting…you are probably losing money. It’s about the gathering of wealth, not the fast cash. At least that’s how I like it!
What shortening is, and why THIS particular situation could happen has been explained now by so many people who know finance, that I am not going to touch it. I liked the way Graham Stephan explains it here https://www.youtube.com/watch?v=8YrnTbzuOWM, but there are many other financial vloggers out there that Youtube will offer you after you looked at Graham’s video of course!)