GameStop case devours the wolves of Wall Street

There is a superior generation that can do away with whatever it wants whenever it wants. A group of forum members crouched in the web, not even in the deep web, who can detonate companies or individuals at the push of a button. People who rebel against the system, against capitalism, against big investors or tycoons. They can do it by sending a group of Mariachis to the White House or by squeezing the necks of the cruel Wall Street investment funds so that they experience the crash of '29 first hand.

Fiction falls short. The series Mr. Robot and Billions play every part of this American film. Reality has surpassed the scriptwriters of these two television masterpieces. And they have a superb ability to write and predict. One of the episodes of Billions, broadcast in February 2020, already included in a dialogue the word "coronavirus", in reference to what was to come weeks later and which stopped the filming of the series itself in its tracks.

The GameStop case has set off global economic alerts. A group of forum members agreed to buy shares in a video game shop to rescue it from bankruptcy. The aim seems lawful. But along the way they have managed to shake the foundations of Wall Street. That the Melvin Capital fund has to beg and call in favours to survive. And that the conclusion of all this is that the rules of the financial market are obsolete.

Argentinian journalist Matias Mowszet has written an enlightening thread on Twitter about the intra-history of GameStop's resurrection and the new technological powers that move the market. The story of the publicly traded network of video game and computer shops is one of thousands of stock market carcasses being exploited by Wall Street vultures in a manoeuvre called short selling.

The North American Reddit is the Spanish Forocoches but more complete. Access is easier and its image is that of a news aggregator and social bookmarking website. One of its subgroups is called WallStreetBets and is dedicated to looking at the New York Stock Exchange. It was created in 2012 and has 6 million users scheming to find the holes in the US economy.

A few weeks ago the flute of their mischief sounded. The group decided to buy shares in GameStop, a video game shop doomed to bankruptcy. Digital formats have sunk physical video games and software subscriptions have wiped out sales of programs such as Windows, Office or Photoshop. The health crisis put an end to the little business that remained, although its owners insisted on staying open in the midst of the pandemic, because they claimed that their products were essential for teleworking.

GameStop's stock went from $17 to $332 in little more than a week. Even Gerard Piqué posted a tweet, surprised by the ability of a forum to give a company a new lease on life. The problem behind this takeover is that the vulture funds that engage in short-selling shares of evicted companies have suffered losses in the millions that have left them on the verge of bankruptcy.

Melvin Capital engages in short selling with positions in companies that have been plummeting on the stock market for years. Sort of like the Bobby Axelrod of Billions with his hedge funds. Melvin Capital borrows shares at a price that it automatically sells for that amount. A few days later he buys back those shares at a much lower price, because they continue to fall. With the proceeds, he pays off the borrowed shares and keeps the difference. Investing against a company is forbidden in Europe, but in the United States it is commonplace and the inspiration for many films and series. Vultures and wolves like the one on Wall Street brought to life by Leonardo DiCaprio.

With the madness unleashed on Reddit, the funds that skinned GameStop have seen their debts grow without limit. Because short-selling has a profit limited to the price of the stock being borrowed, but its losses can be limitless, because the stock can go up and up and up with no ceiling. Logically, nobody expects that to happen. Until it does and Melvin Capital has to call the Big Apple financial district to beg to be allowed to default on its contracts so it can sell positions to stop bleeding to death.

Wall Street bigwigs have gone on the warpath and are calling for market regulation, when a few years ago they wanted to remove the gates to the stock market in order to make more money and let the market balance supply and demand.

Elon Musk also joined the cause to settle accounts with his intimate enemies of the bearish funds. The Tesla owner tweeted the word 'Gamestonk'. A stitch with a golden thread that further boosted the share price and sent investors who are dedicated to punishing his company's shares into the abyss.

The Biden administration is investigating the GameStop case, but not fast enough, because Reddit has already set its sights on reviving other historic companies on the road to ruin, such as BlackBerry and Blackbuster.

You know that past performance does not presuppose future performance. Now more than ever.