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After their soaring in January, the shares of the computer game chain Gamestop have become quiet.
But the stock is back and is currently hovering around 200 euros.
With that, the story of the struggle of the small investors against the hedge funds is back.
This fight began in the Reddit sub-forum Wallstreetbets.
One of the stars of this international community is called “HeyItsPixel”.
His friends outside of the internet call him Josh.
He is 21 years old, German, trained in the legal field and has a full-time position.
Would not like to see further details about himself or his name published.
On Saturday Josh asked himself questions in several live streams on YouTube - partly in German, partly in polished business English.
The next day he meets with WELT for a video conference.
He looks happy and talkative, but also exhausted.
He doesn't look dissimilar to his Reddit avatar picture.
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WORLD:
Josh, how much money have you put into Gamestop in the meantime?
Josh:
About $ 350,000.
WORLD:
Does that count as pocket money in your family?
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Josh:
No, I come from a middle class family.
I never inherited either.
For me, that's a lot of money.
WORLD:
How do you get so much money at 21?
Josh:
I started trading on the stock exchange when I was 17 - it was still illegal because you are only allowed to do so in Germany when you are 18.
And I traded a lot in knock-out certificates and warrants.
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WORLD:
Are you
all in
at Gamestop?
Josh:
I still have a few savings, but a very large part of my capital has been invested.
But even if I lost everything, I would be a normal 21 year old with a full time job.
As long as you don't get into debt, you have the opportunity to recoup losses.
WORLD:
You want to make big money now?
Josh:
It would be nice if I could take profits.
But it's not just about that for me.
I enjoy analyzing things and publishing my theories.
And I'm part of this movement that puts the middle finger on hedge funds.
WORLD:
Let's go back two steps: In the summer of 2020, the Gamestop share stood at three to four euros.
At the end of January it rose to 420 euros, only to crash to around 40 in a short time.
What has happened there?
Josh:
In August 2020, Ryan Cohen, who has built up the Chewy company very successfully, announced that he had bought into Gamestop.
As a result, course has quadrupled.
Then it came out around the turn of the year that the share had been sold short to over 140 percent.
Many thought: Now there can be a short squeeze.
This means that if the short sellers have to buy stocks but cannot find enough stocks in the market, the price will explode.
Many people saw the opportunity to earn a lot of money in a very short time and to show Wall Street the middle finger.
This hype has created a huge demand, which has sparked a gamma squeeze.
Should I explain what a gamma squeeze is?
WORLD:
Let's leave it at that that this has something to do with options trading.
Keith Gill, known as "DeepFuckingValue" on Reddit and "Roaring Kitty" on Twitter and YouTube, announced even before Cohen joined the company that he would buy Gamestop shares.
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Josh:
Exactly.
Gamestop had a large cash flow, hardly any liabilities and the opportunity to become the market leader in the gaming sector when the company underwent a digital renewal.
“DeepFuckingValue” is so called because he thought the stock was undervalued and saw huge potential.
The short squeeze came later.
WORLD:
But then the crash followed.
Josh:
When we were close to 400 euros, Robinhood and other online brokers prohibited the purchase of Gamestop shares and only allowed the shares to be sold.
That caused panic in many.
WORLD:
The brokers said that was to protect small investors.
Josh:
In my eyes it was a clear case of market manipulation.
As a small online broker, in the USA you have to deposit money with a so-called clearing house, in this case the Depository Trust Company (DTC).
DTC has raised Robinhood's bail overnight to a total of $ 3 billion, which is 300 percent of the online broker's equity.
Robinhood did not have these funds and subsequently restricted trade.
Shortly before the market opened, the DTC withdrew the increase in the deposit, but trading remained restricted.
And that's exactly where I see market manipulation.
WORLD:
Robinhood denies influence by hedge funds.
Josh:
Robinhood does its stock trading through a market maker called Citadel.
Citadel is also a hedge fund - and it just so happens to be the one that bought into Melvin Capital, the hedge fund that sold most of the Gamestop shares short and lost over half of its equity due to the price increase in January.
It's as if Manuel Neuer were goalkeeper, coach and referee in one game.
WORLD:
Melvin Capital says they closed their short positions, so they returned the stocks that were borrowed and short.
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Josh:
The official short selling information comes from the hedge funds themselves, there is no way to verify it.
I think Melvin is lying and hiding his short positions in ETFs.
At the same time, a disinformation campaign is being carried out so that something like this is not noticed.
In English, this strategy is said to be “FUD”, which means “spreading fear, uncertainty and doubt” in order to get people to sell.
That partially worked.
But many also said: We are really holding on now.
That was an outcry against the fact that the rules were changed in the middle of the game.
WORLD:
Why has the share shot up again?
Josh:
I guess because now there are some retail investor hedge funds in there too.
They are also interested in a short squeeze.
WORLD:
In the last few weeks you have achieved fame in your community because you came to the conclusion in an extensive, English-language analysis on Reddit that the short squeeze could start around March 19th.
How did you get there?
Josh:
On this one
Wednesday is the next hearing in the US Congress on the gamestop issue.
On Friday is the "Quadruple Witching Day", ie the expiry date for futures transactions.
Many call options at Gamestop expire on the same day.
At the same time, many ETFs pay out their dividends and evaluate their stock holdings.
Gamestop may be kicked out of some ETFs, but I think more ETFs will pick up the stock as Gamestop is being restructured to be “digital first”, a future-proof company that prioritizes online trading.
In addition, a new rule will come into effect on March 19, whereby the DTCC, the association of banks and hedge funds, can request with a phone call that a hedge fund immediately close its short positions if the price has skyrocketed.
In my opinion, these are the catalysts that could lead to a gamma squeeze and ultimately a short squeeze.
WORLD:
Who would foot the bill?
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Josh:
First the short sellers, so the hedge funds.
In addition, banks and insurance companies, and finally the DTCC.
Although it has secured itself with the new regulation.
WORLD:
Aren't you risking a stock market crash with a short squeeze?
Josh:
It could come to that.
Because if the hedge funds have to cover their short positions, they will have to sell other stocks in order to guarantee liquidity.
That would trigger a sell-off.
But it is not the small investors who are responsible for this turbulence, but the hedge funds, which have shorted more stocks than there are in free trade - and the politicians, which did nothing to prevent such a thing.
WORLD:
How high can the rocket shoot?
Josh:
I don't want to comment on that.
WORLD:
When would you start selling?
Josh:
I set my limits, but I don't want to tell you how high they are.
And I don't want to sell all of my Gamestop stock either because I believe in the fundamentals of the company.
WORLD:
What would you do with your winnings?
Josh:
I want to visit children's hospitals in my area and grant them a few wishes.
I would also like to open a café or burger shop in my city.
There homeless people should be able to eat and drink for free - and everyone who took part in the Gamestop thing will get their first food and drink on the house.
I want to invest some of it back in the stock market;
in companies that I like and in ETFs that are a safe investment over the long term.
And when there is something left, I want to fulfill a long-awaited dream and get myself a Lamborghini.
WORLD:
No Tesla?
Josh:
I'm not a fan of electrical engineering at this point in time.
In ten years, I may not be able to drive a Lamborghini again.
I can still get a Tesla then.
WORLD:
Why is Tesla so popular in your community?
Because, despite all the experts, the stock has risen so immensely?
Or because of the contribution to climate protection?
Josh:
Neither.
For the community, the most important thing is the person behind it: Elon Musk.
He is a very inspiring person.
Many look up to him because he believes in his vision and does his thing.
Tesla was at times the most short-selling stock because they said, “It'll never work.” And then hedge fund managers cried out live on TV every week because the stock kept going up.
WORLD:
Many of your peers are involved in Fridays for Future.
Does the topic of climate protection play a role for you?
Josh:
For me it's secondary in this context.
WORLD:
You talk about showing the middle finger to the hedge funds and about a "game stop movement".
Is that an anti-capitalist movement?
A capitalist one?
Josh:
It works across the board: some are very capitalist, others are very anti-capitalist.
It's not such a big issue in Germany.
It's different in the USA.
A great many people suffered from the actions of the hedge funds, banks and rating agencies that led to the 2007/08 crash.
Gamestop now offers them an opportunity to take revenge on the hedge funds.
It doesn't matter what other political attitudes people have.
WORLD:
What is your attitude towards capitalism?
Josh:
I don't see myself as a capitalist or an anti-capitalist.
I am a realist.
WORLD:
At the hearing in the US Congress, in addition to the managers of Citadel, Melvin and Robinhood, "DeepFuckinValue" was also invited.
Was the hearing a success for the movement?
Josh:
Yeah.
But then I found the hearing disappointing.
Whenever things got exciting, the time limit for answers was over.
Let's see how it goes this week.
WORLD:
Which political measures would you like?
Josh:
The managers have to be held personally liable.
Uncovered short selling should be prohibited.
Then stocks could continue to be sold short, meaning the market could regulate overvalued stocks.
But one could no longer try to make infinite profits from uncovered short sales.
And the penalties for false information should be increased significantly.
Because what kind of a $ 500 billion hedge fund is a $ 1 million fine?
WORLD:
Is Gamestop also a generation conflict?
Josh:
Definitely.
I belong to the generation who have to worry about their retirement.
We have a totally outdated pension system.
We have more and more expenses and less and less income in the pension funds.
The generation contract was a nice idea, but it no longer works.
In addition, we have no provision with equity funds like in the USA.
WORLD:
The Riester pension?
Josh:
That's a joke.
WORLD:
The hedge funds also work with employee pension deposits.
You criticize the hedge funds and at the same time call for a share-based pension system.
Josh:
It's actually a disadvantage of this system that hedge funds that attract attention with market manipulation and uncovered short sales are also managing or investing in pension funds.
As far as I know, some of these "401k" retirement funds have now been withdrawn from Melvin and Citadel.
If we in Germany had equity funds for old-age provision, regulations could be created to prevent playing around with the money of the people making the payments.
WORLD:
One of the most common slogans at Wall Streetbets is YOLO - “You only live once”.
People also brag about their losses.
That sounds very anarchistic, even nihilistic.
Now you're saying that at 21 you are worried about your retirement.
Josh:
For me, that's not a contradiction in terms.
For me, YOLO means: I try to build up a fortune with risky stocks and derivatives so that I don't have to worry when I get older.
WORLD:
That sounds more thoughtful than you might expect from “Reddit kids”, who are often mentioned in the media.
Josh:
I thought that coverage was bad.
So the comments were partly good.
But the reports were full of false information.
Journalists should work investigative and engage with the people they write about.
WELT:
One criticism is that small investors would be caught in a pyramid scheme.
Josh:
Gamestop is not a
pump and dump
, so not a pyramid scheme.
We are people who see opportunities for the company.
A snowball system is characterized by the fact that the content of such a snowball has no fundamental value and becomes worthless after the snowball disintegrates.
So I see this comparison as an attempt to discredit retail investors by accusing them of illegal activity.
WORLD:
The hedge funds involved and some observers accuse Reddit users like you of market manipulation.
Would you like to remain anonymous because you fear prosecution?
Josh:
Not at all.
That's just because most of the people around me don't know what kind of fortune I have.
But if all goes well, it would come out anyway.
Maybe then I'll do a live stream showing my face.
WORLD:
No market manipulation on your side?
Josh:
That's a ridiculous charge - and very paradoxical for hedge fund managers to say.
They play by their own rules.
But once their game goes against them, there is a lot of shouting.
The federal government sees it that way too.
In response to an inquiry, she said: As long as false information or goals are not deliberately disseminated, it is not market manipulation to talk about stocks in Internet forums.
Analysts and financial journalists who recommend buying stock XY do nothing else.
WORLD:
But at the current rate, Gamestop remains a risky invention.
Do the people in your community know this?
Josh:
Definitely.
In the forums it says again and again: Don't risk more than you can handle in loss, secure your bets, form your own picture and make your own decisions.
WORLD:
Even more rocket emojis are posted there.
People refer to themselves as "autistic", "mentally disabled" or "monkeys".
Josh:
Before I got so well known, I wrote that too.
This is not meant as discrimination against disabled people.
It has a humorous background: we know that the hedge fund managers read along.
If they lost a few billion overnight and look up on Reddit who they are up against - and then they see a lot of people who call themselves "monkeys" who eat crayons in their free time, the whole thing gets much funnier.
WORLD:
You don't eat crayons?
Josh:
No.
And we shouldn't be underestimated.