Tag Archives: Wall Street

Musk In Talks With Investors To Join His Bid To Take Over Twitter: Report

Martin Walsh
April 18, 2022

OPINION: This article may contain commentary which reflects the author’s opinion.

Elon Musk is reportedly speaking with other investors about joining his bid to purchase Twitter.

Sources told the New York Post that a partnership could be announced within days after Musk formally offered last week to completely buy Twitter for just over $40 billion.

The Post went on to allege that Musk could possibly work with Silver Lake Partners, a company the Tesla CEO has worked with in the past.

“One possibility, the sources said: teaming with private-equity firm Silver Lake Partners, which was planning to co-invest with him in 2018 when he was considering taking Tesla private. Silver Lake’s Co-CEO Egon Durban is a Twitter board member and led Musk’s deal team during the 2018 failed effort to take Tesla private, sources said. Silver Lake declined to comment,” the Post reported.

“For its part, Twitter on Friday adopted a so-called poison pill — a corporate move that prevents Musk from acquiring more than 15% of the company. But that pill may not stop other entities or people from acquiring their own shares of up to 15% of the company. Those owners could partner with Musk to force a sale, make changes in the executive ranks or push for other overhauls of the company,” the report added.

“This is not over,” a source told the New York Post.

The saga between Musk and Twitter has changed by the day.

During a TED talk last week, host Chris Anderson asked Musk if there was a “Plan B” if his current offer to buy Twitter in an all-cash deal were rejected.

“There is,” Musk said.


Musk announced that he had hired Morgan Stanley as an advisor to help with the takeover of the social media giant.

Prior to that, it was speculated that his decision not to take the job means he is now free to improve his position within the company, as in, buy more stock.

Musk signed an agreement with Twitter for the following terms as long as he serves on the board: “Mr. Musk agrees that, for so long as Mr. Musk is serving on the Board and for 90 days thereafter, Mr. Musk will not, either alone or as a member of a group, become the beneficial owner of more than 14.9% of Company’s common stock outstanding at such time, including for these purposes economic exposure through derivative securities, swaps or hedging transactions.”

But since Musk declined to join Twitter’s board, he is no longer bound by that stipulation, journalist Yashar Ali noted.

Twitter CEO Parag Agrawal said in a statement that it was Musk’s decision to not join the company’s board after he was offered a seat.

“Elon Musk has decided not to join our board,” Agrawal said. “The Board and I had many discussions about Elon joining the board, and with Elon directly. We were excited to collaborate and clear about the risks. We also believed that having Elon as a fiduciary of the company where he, like all board members, has to act in the best interests of the company and all our shareholders, was the best path forward. The board offered him a seat.”

“We announced on Tuesday that Elon would be appointed to the Board contingent on a background check and formal acceptance,” Agrawal continued. “Elon’s appointment to the board was to become officially effective 4/9, but Elon shared that same morning that he will no longer be joining the board. I believe this is for the best.

“We have and will always value input from our shareholders whether they are on our Board or not. Elon is our biggest shareholder and we will remain open to his input,” Agrawal added.

“There will be distractions ahead, but our goals and priorities remain unchanged,” the statement added. “The decisions we make and how we execute are in our hands, no one else’s. Let’s tune out the noise, and stay focused on the work and what we’re building.”

Pelosi Caves, Will Acquiesce to Bipartisan Pressure on Stock Trading Ban: Report

Jack Davis, The Western Journal
February 9th, 2022

House Speaker Nancy Pelosi of California supports passing a ban on trading in individual stocks by members of Congress, according to a new report.

The report from Axios, citing Punchbowl News, aligns Pelosi philosophically with lawmakers who want to ban this practice — an issue that already has bipartisan support in the Senate.

According to the New York Post, Pelosi said on Dec. 15 that members of Congress should be able to trade in individual stocks.

“We’re a free-market economy,” Pelosi said. “[Members of Congress] should be able to participate in that.”

She added that lawmakers need to disclose stock market purchases and actions when they take them.

“We’re a free-market economy,” Pelosi said. “[Members of Congress] should be able to participate in that.”

She added that lawmakers need to disclose stock market purchases and actions when they take them.

“I just don’t buy into it, but if members want to do that, I’m OK with that,” Pelosi said last month, according to NPR.

She said disclosure laws provide the needed level of transparency.

“I have great confidence in the integrity of my members,” Pelosi said.

But Pelosi has become a lightning rod for this issue due to stock trading done by her husband, Paul.

According to disclosures, Paul Pelosi purchased between $1.75 and $3.6 million worth of call options between Dec. 17 and Dec. 22 for companies including Google, Salesforce, Roblox and Disney.

The largest purchases were between $500,000 and $1 million for Google and between $600,000 and $1.25 million for Salesforce.

Further, dozens of members of Congress have been cited as violating the Stop Trading on Congressional Knowledge Act of 2012 by not disclosing their financial trades. There were 55 members who failed to properly report their trades, Insider reported.

The STOCK Act was passed to limit potential conflicts of interest and to encourage congressional members to be transparent about their personal finances.

Democratic Sens. Jon Ossoff of Georgia and Mark Kelly of Arizona, along with Missouri Republican Sen. Josh Hawley, have reintroduced the legislation to ban congressional stock trading, Newsweek reported.

“Year after year, politicians somehow manage to outperform the market, buying and selling millions in stocks of companies they’re supposed to be regulating,” Hawley said in a statement.

“Wall Street and Big Tech work hand-in-hand with elected officials to enrich each other at the expense of the country.”

Axios, citing Punchbowl News, said the STOCK Act and other ethics laws will face a revision. But despite agreement on the broad outlines of legislation, the details remain to be filled in.

Differing versions of the legislation to be considered exist.

Some would ban spouses from trading in individual stocks, which would directly impact Pelosi. Other versions allow lawmakers to hold stocks in trusts composed of multiple stocks, while other versions would require lawmakers and spouses to put all of their investments in a blind trust.

This article appeared originally on The Western Journal.

Facebook Plummets 20% After Missing Across The Board; US Users Drop, Guidance Disappoints

Heading into today’s earnings from social media giant Facebook Meta (technically, the first quarter since the company changed its name), JPM previews expectations as follows: buy-side is at the top end of Q4 guide (21%reported growth), with the expectation that management steer to a Q1 deceleration q/q (consensus +16%) and reiterate $91-97b FY expense guide. With the new reporting structure, the bank expects RL to represent a LSD% of total revenue and would like to see additional disclosure around VR unit shipments, engagement, developers, etc. The bank also expects FB to have passed 10m active VR units.

If that sounds a bit too arcane, Loup Funds’ Gene Munster simplifies it, tweeting that “the most important metric is MAU/DAU growth. Street is looking for up 5%. If the base is growing, the company can power through IDFA and macro headwinds. If engagement declines, FB will need the metaverse to bail them out.”

As for why FB (not to be confused with META) matters, JPM writes that its earnings along with AMZN, Friday’s Payrolls and the upcoming CPI print, will determine whether the market can sustainable rise from here.

Unfortunately, if it really depends on Facebook then we have a problem because moments ago Facebook reported EPS and DAU which both missed, and while the company beat modestly on revenues, the kicker was the company’s revenue guidance was well below expectations, and as a result the stock is crashing a whopping 16% 23% after hours.

Here is what Facebook reported for Q4:

  • Revenue $33.67B, beating est. $33.43B
    • Advertising revenue $32.64 billion
  • EPS $3.67, missing estimate $3.84
  • Operating margin 37%, missing estimate 38.7%

Some context: earnings were 4% below expectations, and that is enough to make it the company’s biggest miss ever.

And visually:

It was also ugly across the board on the user side:

  • Monthly Active Users 2.91B, missing estimates 2.95B
  • Daily Active Users 1.93B, missing estimates. 1.95B

Digging through the numbers shows that the company’s DAUs in the US and ROW actually declined in Q4!

And then there was guidance which was even worse:

  • Q1 Rev. $27B to $29B, Est. $30.25B: FB expects year-over-year growth in the first quarter “to be impacted by headwinds to both impression and price growth.”
  • Sees 2022 total expenses in the range of $90-95 billion, updated from the prior outlook of $91-97 billion: FB: “Our anticipated expense growth is driven by investments in technical and product talent and infrastructure-related costs.”
  • Sees 2022 capital expenditures, including principal payments on finance leases, in the range of $29-34 billion, unchanged from the prior estimate

As a reminder, starting this quarter, the company reports its financial results based on two reportable segments:

  • Family of Apps (FoA), which includes Facebook, Instagram, Messenger, WhatsApp and other services.
  • Reality Labs (RL), which includes augmented and virtual reality related consumer hardware, software and content

These are shown below:

Commenting on what was a dismal quarter, the CFO had this to say:

  • On the impressions side, we expect continued headwinds from both increased competition for people’s time and a shift of engagement within our apps towards video surfaces like Reels, which monetize at lower rates than Feed and Stories.
  • On the pricing side, we expect growth to be negatively impacted by a few factors:
    • First, we will lap a period in which Apple’s iOS changes were not in effect and we anticipate modestly increasing ad targeting and measurement headwinds from platform and regulatory changes.
    • Second, we will lap a period of strong demand in the prior year and we’re hearing from advertisers that macroeconomic challenges like cost inflation and supply chain disruptions are impacting advertiser budgets.
    • Finally, based on current exchange rates, we expect foreign currency to be a headwind to year-over-year growth.
  • In addition, as previously noted, we also continue to monitor developments regarding the viability of transatlantic data transfers and their potential impact on our European operations.

In kneejerk reaction to this dismal quarter, Facebook is down 23% or $75 to $245, the lowest price since Jan 2021.

The afterhours drop of $70, or about 23%, is the single biggest one-day drop in FB history. In market cap terms, FB has lost $165 billion in market cap, or roughly half the market cap of Ether.

Meanwhile, these guys had literally one job and, yet, 52 out of 62 highly paid Wall Street “professionals” just cost their clients billions…

Source: ZeroHedge

Bipartisan Coalition Demands Vote On Legislation To Bar Congress From Trading Stocks

A bipartisan group of more than two dozen lawmakers in the House is demanding that Speaker of the House Nancy Pelosi (D-Calif.) allow a vote on a bill that would bar members of Congress from trading on the stock market, which critics say is inappropriate due to Congress’ inside knowledge on financial and political affairs.

Rep. Jared Golden, D-Maine, speaks in Bath, Maine. Golden was the only Democrat lawmaker to break with his party and vote against the $1.9 trillion COVID-19 relief package on Wednesday, March 10, 2021. (David Sharp, File/AP Photo)

The demand was made in a Jan. 24 letter spearheaded by Rep. Jared Golden (D-Maine). A total of 27 lawmakers signed Golden’s petition, including 25 Democrats and two Republicans.

In the letter’s opening line, the coalition demands that Pelosi “swiftly bring legislation to prohibit members of Congress from owning or trading stocks.” Two bills that would do just that, the “Ban Conflicted Trading Act” and the “TRUST In Congress Act,” have been sitting in congressional limbo.

The responsibility to bring them out of this limbo lies largely with Speaker Pelosi, but she has thus far made no effort to bring either bill to the floor for a vote.

House Speaker Nancy Pelosi (D-Calif.) speaks at her weekly press conference at the U.S. Capitol Building in Washington on Dec. 8, 2021. (Anna Moneymaker/Getty Images)

Golden argued that such a ban would be a “common sense measure” that is “supported by Americans across the political spectrum.”

A recent poll vindicates this latter claim.

The poll, conducted by the conservative group Convention for States Action in conjunction with Trafalgar, found that more than three-fourths of Americans believe that lawmakers have an “unfair advantage” over others in the stock market.

Speaking on the poll results, Mark Meckler, president of Convention of States Action, said, “Congress has a history of passing laws that make it appear as if they are behaving ethically, while continuing to do things that are not honest nor ethical. This issue has received a lot of attention, and this data verifies the American people want this practice to end once and for all.”

This issue has a storied history in Congress.

In 2012, Congress passed the STOCK Act, a bill that required members of Congress to publicly disclose their financial transactions. However, a recent investigation by Insider found that a laundry list of lawmakers in both the House and Senate had violated the provisions of that law.

In view of this, the lawmakers write, “It’s clear the current rules are not working.”

In another recent example of potential insider trading, several members of Congress allegedly sold off stock ahead of the crash precipitated by the CCP (Chinese Communist Party) virus. These members had received nonpublic briefings on the developing virus, leading many to believe that their sudden stock sales were carried out on the basis of this knowledge.

“The law prohibits only those stock trades that members of Congress make or direct because of their nonpublic knowledge,” Golden explains in his letter.

But it can be nearly impossible to determine what counts as ‘nonpublic knowledge’ or how personally involved members are in their stock trades.”

“Instead,” the lawmakers demand, “Congress should close these loopholes by simply banning members from owning or trading individual stocks while in office.”

We came to Congress to serve our country, not turn a quick buck,” the lawmakers continue.

“While there are many difficult questions facing Congress, this is an easy one,” the letter concludes. “Members of Congress should not be allowed to own or trade individual stocks. Let’s get this done.”

The letter is a rare show of bipartisanship, including a very unlikely alliance of America First conservatives and left-wing progressives.

The Democrat roster includes prominent progressives like Reps. Rashida Tlaib (D-Mich.) and Pramilla Jayapal (D-Wash.), who have both been outspoken in favor of sweeping institutional reforms and pricey social spending bills.

The two Republican signatories are Rep. Matt Gaetz (R-Fla.), a Trump-adjacent Floridian who has fought against government measures that give an unfair advantage to major corporations or the ultra-wealthy, and Rep, Brian Fitzpatrick (R-Pa.), a longtime moderate who joined Democrats in passing the $1.2 trillion infrastructure bill in late 2021.

Rep. Matt Gaetz (R-Fla.) in the East Room of the White House in Washington on Feb. 6, 2020. (Charlotte Cuthbertson/The Epoch Times)

Speaking on the letter, Gaetz quipped that “Rashida Tlaib and I don’t often agree. But when we do,” he added, “America should totally go that direction.”

However, not all lawmakers feel the same way about a stock market ban.

Most prominently, Speaker Pelosi made it recently clear that she thinks lawmakers should have access to the market.

During a mid-December press conference, just after Insider released its report on violations of the 2012 STOCK Act among members of Congress from both parties, Pelosi was asked whether a stock ban for members of Congress would be appropriate.

“No,” Pelosi responded quickly. “We have a responsibility to report [our trades] … [and] if people aren’t reporting, they should be.”

Further pressed to explain her “no,” Pelosi argued, “Because we’re a free market economy. [Members of Congress] should be able to participate in that.”

Pelosi has had her own scandals in regards to trading by her husband Paul Pelosi.

In 2008, Paul Pelosi bought $2 million of stock in Visa at the same time that Congress was considering a bill that would have seriously undercut the debit and credit card giant’s profits. Though the bill had gained momentum, it inexplicably stalled and died in the House.

Because Pelosi was speaker at the time many, including NBC’s 60 Minutes in a 2011 episode, speculated that there was a connection between Pelosi’s trade and the bill’s sudden collapse.

Paul Pelosi and Nancy Pelosi attend the TIME 100 Gala 2019 Cocktails at Jazz at Lincoln Center in New York City on April 23, 2019. (Jemal Countess/Getty Images for TIME)

More recently, Paul Pelosi made a bullish bet in favor of Google parent company Alphabet, just as a bill designed to undercut tech monopolies was gaining significant momentum in the House. While others pulled out over fears about the antimonopoly bill, Pelosi’s unlikely bet paid off, netting the Pelosis a cool $5 million.

In fact, Pelosi’s portfolio has seen such spectacular returns that would-be investors on the Chinese-owned social media platform TikTok began to follow Pelosi’s releases and emulate his trades.

Rep. Dan Crenshaw (R-Texas) has also defended stock trading by sitting members of Congress.

According to a report by Unusual Whales, Crenshaw received the fifth-highest returns of any member of Congress for his stock trading in fiscal year 2021. During an appearance on the All American Savage Show podcast, Crenshaw discussed the returns and his position on congressmen trading on the stock market.

The host asked Crenshaw whether he thought that sitting members of Congress should be allowed to go into the stock market.

“I think it would be fine if you banned individual stock trading,” Crenshaw said, before clarifying, “Notice I said ‘individual stocks.’”

The Texas Republican explained that while he would accept bans on buying and selling individual stocks, he thinks that congressmen should still be allowed to invest in ETFs and similar stock collections.

I’m kinda neutral on it,” Crenshaw continued. But if such a ban were put in place, Crenshaw claimed, “no one would run for Congress because you have no way to better yourself.”

House Homeland Security Committee member Rep. Dan Crenshaw (R-Texas) speaks during a hearing in the Rayburn House Office Building on Capitol Hill in Washington, on Sept. 17, 2020. (Chip Somodevilla/Getty Images)

Ultimately, the decision to bring a stock trading ban to the floor lies with Speaker Pelosi.

Still, the bipartisan support for Golden’s Monday letter indicates that members on both sides of the aisle remain committed to moving the agenda forward.

If brought to the floor, either of the two bills proposed to address the situation would represent the most substantial stock market reforms for a decade.

However, the coalition behind the reforms remains small, and more support in both the House and Senate, plus Pelosi’s acquiescence to bring either bill to the floor, will be needed for the reform to have a shot at making it to President Joe Biden’s desk.

Pelosi Faces Bipartisan Pushback as She Continues to Defend Lawmakers Who Trade Stocks

Sophie Mann
December 21st, 2021


wealth increase

House Speaker Nancy Pelosi (D-Calif.) has been facing wide pushback for her recent defense of members of Congress who continue to trade stocks while in office.

Last week, when confronted with a Business Insider report that found dozens of lawmakers and staffers had, at some point, violated a law that prevents insider trading, she declared, “We are a free-market economy. They should be able to participate in that.”

Pelosi and her husband have had a famously successful run with their personal market holdings and saw their family’s wealth increase over the course of the pandemic, as she and her husband consistently placed market bets that have more than proved their worth. 

Now, however, it appears that lawmakers from both parties are speaking up against the practice of playing the market from a position of increased knowledge and power.

Rep. Abigail Spanberger, a moderate Democrat in a hotly contested Virginia district, recently tweeted in response to Pelosi, “No. It cannot be a perk of the job for Members to trade on access to information.”

Rep. Andy Kim (D-N.J.), another member locked in a tough district, agreed. “Americans are losing trust in government and we need to show we serve the people, not our personal/political self-interest,” Kim said.

Rep. Dean Phillips (D-Minn.), whose personal fortune tops $60 million, said he “disagree(s) with the Speaker.”

Also taking a hardline stance against trading while in Congress is Rep. Alexandria Ocasio-Cortez, D-N.Y., who says she holds no individual stocks or digital assets. 

“There is no reason members of Congress should hold and trade individual stock when we write major policy and have access to sensitive information. There are many ways members can invest w/o creating actual or appeared conflict of interest, like thrift savings plans or index funds,” she said.

Earlier this Congress, Spanberger introduced a bill that would require lawmakers, as well as their immediate family members, to place their assets in a blind trust while the members remain in office. 

Phillips, who is a cosponsor of the bill, said “I’ve done it, and I believe we all should.”

The bill has drawn a wide array of support from around the chamber, including incoming House Freedom Caucus chairman Scott Perry (R-Penn.).

Rep. Chip Roy (R-Texas), an original cosponsor of the legislation, recently tweeted, “Actually, Members of Congress SHOULD NOT be trading stocks themselves while in office.”

Several members of the Upper Chamber came under scrutiny last year for selling off substantial amounts of stock in late January and early February 2020, as they were receiving classified briefings pertaining to the onset of the novel coronavirus.

Sen. Richard Burr (R-N.C.) stepped down from his post as chairman of the Senate Intelligence Committee after he was accused of insider trading. Sens. James Inhofe (R-Okla.), Dianne Feinstein (D-Calif.), and Kelly Loeffler (R-Ga.) also faced questions.

Of Course Pelosi Doesn’t Want Congress Banned From Trading Stocks — She Rakes In Millions From It

Jordan Boyd
DECEMBER 16th, 2021 

14 Members of Congress Accused of Violating Federal Law in New Report

Pelosi Appears to Break Promise to Democrats to Leave Leadership After 2022

Speaker of the House Nancy Pelosi doesn’t want Congress banned from trading stocks because she profits big from her and her husband’s investments on a regular basis.

In a press conference on Monday, the Democrat said that representatives and senators should do their best to comply with the reporting standards required by the Stop Trading on Congressional Knowledge Act, signed into law in 2012, but rejected the suggestion that legislators and their spouses should be barred from trading.

“We are a free market economy that should be able to participate in that,” Pelosi said.

Like many others in Congress, Pelosi and her husband, Paul Pelosi, a San Francisco real estate investment mogul, have poured tons of money into the stock market and profited millions off of shares largely staked in Big Tech stocks such as Alphabet, Google’s parent company. According to disclosure forms collected in the House, Pelosi has reported holding stocks in Microsoft, Roblox, Netflix, and recently sold Facebook and Apple shares.

Pelosi isn’t the only member of Congress who makes money off of trading on some of the same companies that are regularly called to testify in front of her chamber’s committees. A recent report from Insider found that 49 other legislators not only frequently involved themselves in stock trades but also failed to disclose their dealings in accordance with the STOCK Act in a timely manner or at all. The list is filled with Republicans and Democrats who, despite the law designed to curb any insider trading and conflicts of interest, “offer excuses including ignorance of the law, clerical errors, and mistakes by an accountant” to justify their lack of financial disclosures.

Several members of Congress have lobbied for a ban on trading including members of the left-most wing of the Democrat Party such as Rep. Alexandria Ocasio-Cortez of New York.

“It is absolutely ludicrous that members of Congress can hold and trade individual stock while in office,” she tweeted at the beginning of December. “The access and influence we have should be exercised for the public interest, not our profit. It shouldn’t be legal for us to trade individual stock with the info we have.”

Sen. Jeff Merkley, D-Ore., even went so far as to introduce legislation barring lawmakers and their aides from dealing in the stock market while in office. The bill gained support from some Republicans including Reps. Matt Gaetz of Florida and Michael Cloud of Texas, who helped introduce it in the House. But with so many legislators involved in trading, including those in Democrat leadership such as Pelosi, it is unlikely that a full ban would ever become popular enough among members to pass without more pressure.

Redditors Fleece Wall Street, Establishment Protects Itself

Ryan DeLarme
January 30th, 2021

(Ryan DeLarmeA band of anonymous Redditors have come together to stick it to some big-money hedge funds, the historic financial event is being described as a populist rebellion against Wall Street.

Regardless of what methods you rely on to shape your world view, be it mainstream media, social media, or the alternative media; you’ve likely at least heard of the fiasco happening between Redditors and Wall Street. 

What Exactly Occurred

Enter Wall Street bets. Wall Street Bets is an online community based primarily around YOLO stock plays and is likely not some shadowy cabal of elite hedge fund executives. It appears to be mostly just regular people having fun in an online community, though it’s always a possibility that there’s more to the story.

Authors note: In the coming days and weeks, you will likely be seeing coordinated attacks against this board and any others like it. You will probably hear them labeled as “alt-right” or “incels”, you will probably hear the word GamerGate or Nihilist or Nazi. Do not listen to them, these tired tactics have been pinned on just about anyone who dissents from or threatens the establishment. This is a group of people who joke about and invest in various stocks, that’s all. And the community has exploded to new sizes since then. But when all this began, it was just retail investors communicating and having fun anyways.

Wall Street Bets is a Reddit investment board that covers a number of stocks in a number of different strategies (The group also had a Discord channel, both have since been removed from the respective platforms). For a while now, there’s been a specific focus in these communities on GME or GameStop. GameStop has been in a financial toilet recently, they posted a half a billion-dollar loss in twenty eighteen and have posted higher than expected losses in two consecutive quarters of twenty-twenty. The physical to digital conversion of purchasing habits have made them a sort of brick-and-mortar dinosaur in a mostly digital world.

Regardless of what the company is or is not, and who sits on the board (a data point of particular interest to a lot of people for long term strategies), none of it really matters at all because Reddit, spearheaded by Wall Street bets, just used the company as a weapon against Wall Street short-sellers to devastating effect. Many of them have gotten rich in the process.

The basic principles that allowed this to happen are as follows: You can either buy long or sell short, buying long as the simplest method, which involves getting a stock and just waiting for it to rise, get bought out, or just be worth more than you paid somehow, etc. Selling short is effectively borrowing shares from a broker and then selling them onto the market with a promise of “I will buy shares again to return to you in the future”

It’s sort of like an upside-down version of traditional stock investing. And an easy example would be if I buy 10 shares of a company worth ten dollars for one hundred dollars total and it rises to twenty dollars, I sell for 200 making a hundred dollars. But if I short ten shares of a company worth ten dollars and it falls to five dollars, I can cover my shares, rebuy them and pocket the fifty dollar difference. Hedge funds utilize this concept regularly and are almost guaranteed to see profits while adversely affecting other investors.

the basic principle of leverage is that you can increase your buying/selling power beyond what you actually have. This is dangerous because it creates margin calls. A margin call is an official warning by your broker or your bank that essentially you have overextended and you need to reduce your risk, deposit more cash, or otherwise fix this in some way

A margin call can happen when, for instance, the price of a stock climbs rapidly when you are short selling a leveraged amount that is greater than your actual holdings. To summarize, borrow shares, borrow even more shares than you have the money for or are capable of paying back betting on the price to go down. Highly dangerous, but if the price goes up too fast, you get squeezed and you’re in big trouble. That is what investors on Reddit were counting on, and that is what caused GameStop over the span of just a couple of weeks to rise by orders of magnitude that otherwise would have been completely impossible.

Now to get to the brilliance of it, although users on Reddit identified that GameStop was being sold short by not just some but most investors on Wall Street, the company was under so much downward pressure that it had actually gone negative. Essentially, the company had issued more shares to be sold onto the market than it even has, and the potential to create a “short squeeze” was tremendous. So the word goes out on Wall Street bets and other online message board communities, people begin to marshal their forces and their capital.

The goal was to make Wall Street bleed, over the past week we’ve seen their results. It absolutely worked.

The big money elites need to preserve their investments so naturally, they created a trading freeze. The trading freeze mechanic is in place to prevent automated systems from going haywire, but they put in certain safeguards to prevent catastrophic movements in the market. GameStop trading was halted because Reddit users had brutalized Wall Street, the play had worked and it worked so well that all the fail-safes kicked in.

Reddit outplayed Wall Street, squeezed the shorts into oblivion on GameStop, driven the price up by over 20 times its bottom value to all-time highs period ever. The only way it got stopped, for now, was a cold freeze on trading to let the suits breathe.

For some reason, when the tables are turned and it is the independent retailers getting in on the action and the hedge funds are getting smoked, it suddenly becomes illegal. This fellow sums it up pretty well:

Now, this is where we get into territory that our readers are more familiar with. Here are some names to familiarize yourself with if you haven’t already:

Robinhood Markets, Inc. an American financial services company headquartered in Menlo Park, California. Robinhood is a FINRA regulated broker-dealer, registered with the U.S. Securities and Exchange Commission, and is a member of the Securities Investor Protection Corporation.

Citadel LLC: Founded by billionaire Ken Griffin, the hedge fund has a “partnership” with Robinhood. Have recently been accused by a swarm of investors on social media of colluding with the online brokers to freeze the purchase of shares in companies that have in recent weeks experienced short squeezes.

“Vampires All the Way Down”

This whole situation has put a lot of eyes on Wallstreet, the Central bank,  hedge funds in general. The people are learning that there are 2 sets of rules for the ruling financial elite and the everyday Joe/Joanne. Now the world has seen how the establishment protects itself, it took less than a day for big-tech, big-government, and the corporate media machine to spring into action and protect their hedge fund buddies on Wall Street.

Robinhood, one of the most popular free trading apps in America, stopped ordinary investors from being able to buy shares in GameStop, after users from the subreddit r/WallStreetBets and others engaged in the short squeeze. Many other trading apps and exchanges also stopped the buying of the “meme stock” shares and delisted them from their platforms.

In a statement, Robinhood claimed that they had to shut down the buy orders on GameStop and other “meme stocks” because of “the recent volatility” in the market. “We’re committed to helping our customers navigate this uncertainty,” the firm said.

However, accusations began flying that Robinhood was not doing this for the good of their customers, but for the good of Wall Street, with some highlighting that Robinhood’s “primary revenue stream” last year was from selling orders to hedge funds like Citadel Securities. Citadel bailed out Melvin Capital, the hedgefund that took the biggest hit from their attempt to short GameStop.

In a letter to the Department of Justice, Representative Paul Gosar said that he was “greatly troubled with the events that have unfolded on Wall Street,” and is demanding action from them. Robinhood’s “unilateral move” to stop the buying of GameStop shares “was done so in a concerted effort to de-platform and silence individual investors,” he argued.

Gosar also drew a suspicious link between Melvin Capital, Citadel, and Robinhood, highlighting an article from Bloomberg that noted roughly 40% of Robinhood’s revenue was down to Citadel and other big Wall Street hedge funds.

“Knowing the involvement Citadel has with Robinhood, it is clear that the actions taken today were motivated by anti-competitive reasons, not for concerns of volatility claimed by Robinhood,” Gosar argued. “Because of this blatant conflict of interest and obvious monopolistic activity, I am calling on an immediate investigation by the US Department of Justice into Robinhood and the hedge fund of Citadel LLC.”

@toxic laid out their perspective:

Step 0: Citadel pays Robinhood for order flow. Citadel gets to see RH’s orders a few milliseconds before they’re filled. Citadel may choose to front-run some of those trades.

Step 1: RH’s customers and WallStreetBets start manipulating $GME. This is happening in the open.

Officially, they’re manipulating $GME (and $BB and $KOSS) because these low-value stocks are being very heavily shorted, and if something moves the value of the stock up (like tens of thousands of retail investors acting in near unison), those short-sellers may be forced to sell to cover their borrowed shares. If most shares are held by retail investors who won’t sell, the price will skyrocket (supply/demand) until someone does. The bear hedge funds and such will still have to buy to cover, which may cause a bit of a liquidity crisis for the funds.The concept of “Screw the hedge fund vampires who exist only to destroy companies like Gamestop” is a big part of /r/WallStreetBets’s messaging. It’s a compelling message and a decent secondary reason for this. The primary reason to manipulate markets remains profit, though.Step 2: HFTs buy shares ahead of Robinhood users. Remember Citadel, the firm that can front-run Robinhood trades, and got to see all of that RH data a little early because they paid for flow? Yeah. When do you think they started buying $GME in front of RH traders on momentum? Because the volume of shares exchanged suggests that the HFT folks were all over this, all the way to $150. The message on WSB might be “lots of little guys screwing big Wall Street”, but the truth is that the HFT robots were screwing everyone while paying Robinhood a kickback.Step 3: A hedge fund becomes insolvent. Today it was Melvin Capital Management. It very likely won’t be the last. Melvin immediately sells off a portion of itself, because it needs the influx of cash or it will vanish in a poof of smoke, vaporizing ~$15 Billion in the process.Step 4: Who’s the lead investor, picking up part of a usually successful fund at fire-sale prices? Right. Citadel, probably with some of the cash they made by repeatedly profiting in the milliseconds before filling the trades that collapsed this fund.

[See: Citadel, Point72 to Invest $2.75 Billion Into Melvin Capital Management]

Step 5: Citadel still has access to RH order flows, is still allowed to front-run them and/or pocket the spread and can use that and other information to determine the next over-leveraged fund that’s going to get squeezed. They might even be able to accelerate the squeeze. So, the next time you discount the impact of “4chan with a Bloomberg terminal”, remember that they are not the only ones who stand to benefit from intentionally screwing exposed short-sellers. The professionals are all too happy to amplify the efforts of the amateurs for profit. Because if amateurs manipulate the market, uh, truthfully, then nobody loses their license. “I (retail investor) bought because I hate Citron & hedge funds, and we’re going to screw them for profit. Join us, but do your own due diligence. YOLO!” might just be legal. IANAL. If a licensed broker/dealer did this, they’d lose their license, and probably go to jail. Martha Stewart did time for less. But Citadel, by paying for order flow and sitting in the middle, gets to legally ride-along, printing money the whole way.So, when you ask yourself, “who pays for no-commission trades, and why?” or “what’s the harm of RobinHood’s business model?”, take a look at what happens behind the scenes, in the milliseconds after you press buy, but before you own those shares. It’s vampires all the way down.

And now we have a class action complaint about Robinhood filed in the southern district of NY

A Heartwarming Turn for AMC

Gamestop or GME may be getting all the buzz, but it’s not the only stonk involved in the shenanigans. As we mentioned earlier, the trading of AMC and EXPR was also halted by Robinhood via Citadel after the internet mischief-makers targeted those stocks. These folks may be getting a bad rap from folks like Elizabeth Warren and the SEC, but these Reddit rebels may have just saved AMC Theatres from more than half a billion in debt.

RelatedSec Issues Statement on past Week’s Turbulent Market Activity Prompted by Reddit-fueled Gamestop Run

RelatedElizabeth Warren Enters the Gamestop Fracas with Open Letter to Sec

The theater chain, like pretty much all theater chains, has been ripped by the COVID pandemic. It’s difficult to remember, since “two weeks to flatten the curve” turned into “we’re never ever ever getting back to normal,” but theater chains were enjoying something of a revival in late 2019 and early 2020. Then COVID struck and no one could go to the movies.

AMC Theatres was just about dead as of Monday this week. But along with GameStop and BlackBerry, Reddit’s r/wallstreetbets (WSB) targeted AMC’s stock for a revival. “We like the stock,” they said. Well, it worked!

[O]n Wednesday, a private equity firm named Silver Lake — and private equity firms are popularly considered the “bad guys” in this snobs-versus-slobs drama — elected to convert the corporate bonds it held into AMC Entertainment Holdings stock. Although the theater chain’s stock price has tumbled and soared since the move, the debt relief is permanent.

Wiping out more than half-a-billion dollars in debt, though, should take a lot of pressure off AMC in the short term. “A week ago, it was not crazy to think this company was doomed,” Bloomberg’s Matt Levine wrote on Thursday. “Now it is entirely possible that it will survive and thrive and show movies in movie theaters for decades to come because everyone went nuts and bought meme stocks this week.”

That’s thanks to a few million retail stock buyers who constantly insult themselves and swear they’re financial idiots between swearing revenge on the architects of the 2008 financial collapse.

The contrast between them and the hedge-fund predators they’re targeting on the GameStop stock could not be more dramatic now. WSB targeted GameStop because Melvin Capital had overleveraged itself betting that GameStop would lose value and die. They wanted to save the video game seller, sure, and they wanted to draw blood from the company that was betting on GameStop’s death.

Here, they’ve put their cash on the line and given AMC a significant reprieve just in the nick of time. Maybe it will last long enough for normal to return after all.

Alleged Robinhood “Insider”

An anonymous person has come forward alleging to be a Robinhood “insider” and has claimed on Reddit that the Biden administration contacted the broker to pressure it to close trading on GME. The post has since gone viral, receiving over 23,000 upvotes.

The full post is reprinted below;

I work for Robinhood. Don’t kill me.

Low-level, technical shit, comp sciences major, not finance side.

Guess what we overhead today?

Vladimir, yes founder Vladimir, and the C-Suite, received calls from Sequoia Capital and the White House that pressured into closing trading on GME etc. I guarantee you the same took place at E-Trade and the others who closed trading.

File reports on the SEC page. If I wasn’t scared to be out of work in a pandemic I’d quit. I’m disgusted. We all need to rise up, this is as bad as it gets when we talk about how the rich get one set of rules, and the rest of us get screwed over, and over, and over again left to bail them out and pick up the tab for their trillion dollar tax breaks. We need to pile pressure on every government and financial institution involved in this travesty of justice.

I’m taking a massive career risk even posting here but f-ck these motherf-ckers.

The Biden White House said it was “monitoring” the GameStop situation yesterday but hasn’t announced any action publicly. Meanwhile, in an email sent out thursday, Robinhood says it will allow “limited buys” of GameStop and other similar stocks tomorrow.