In the story of Gamestop, the media has been pushing a classic David and Goliath story for the past several weeks as a few hedge funds (out of something like 10,000 funds, tho the precise number is unknown) got caught in a most amusing short squeeze.
It does seem likely that online fora were the germ of the squeeze idea; clearly some relatively small investors were able to acquire decent numbers of shares in the early goings, when shares are $5, even a speculative-minded retail investor with $10 or $100k can start acquiring a solid amount of daily trading volume, reducing float and shares available to borrow or to buy to cover.
But I wonder how much of this squeeze was ultimately orchestrated by some other big funds or players; it is possible, indeed, even probable, that other funds smelled blood and also purchased? Might it have been a case of professionals gaming other professionals with a few retail investors just making out like bandits?
One theory would be - no, since if that were true, someone would be talking about it - and the media hasn't said anything. But a second view might be, what incentive does the media have to tell the story? So long as anonymous day traders with fabulous but unverifiable human interest stories can claim to be "winning one for dad" clicks rain down on the articles. If the story was, hedge fund A crushed hedge fund B, it would get some play among the financial literati, but would likely not seep out into the wider culture.
So no journalist is going to be assigned to get to investigate and the funds that made the money probably don't want to share, since it paints a target on their own backs.
But honestly, when the shares were at $300 and $400, how many retail investors could be buying in any volume? $10k nets 33 shares, against a trading volume in the millions. If the retail investor was buying and selling (day trading) then ok, he could round trip many times, but then he wasn't "holding the line" as a hero, but rather just a guy exploiting volatility.
No, it seems to me, that the most likely story is that some hedge funds saw movement and started buying with the intent of generating the squeeze. They would be best positioned to negotiate the private market transaction to deliver the shares the funds needed to cover once things really got going.
Moreover, one has to ask why management didn't avail themselves of the opportunity to issue additional shares; these are authorized and management could have registered more shares for sale with the SEC, EXCEPT that management wanted to sell their own shares and if there was a new round of shares sold by the company, management would be barred by insider trading rules for six months from dumping their shares. So they prioritzed themselves over increasing the financial strength of the company with insanely cheap capital. No one is telling that story, either. Note that management telling people that they would issue additional shares would have broken much of the speculative bubble.
And quite frankly, reading some of these stories of these small investors, one really has to wonder if they aren't all fabulists - a class of people increasingly taken in by a media desperate for narrative stories that play to subscriber bias.
I have owned small businesses and have worked for them, too. I have never known small business owners to be as reckless with their financing as the people described in these bios. Every one of these children of small business owners who had the company "implode in a week" with nothing to show for it? How many small business owners are so illiquid? It's perhaps easy to believe this if you are an employee living paycheck to paycheck, but most small business owners I know keep large amounts of liquidity on hand. In fact, one of the primary differences between founder led firms and management led ones is a demonstrable liquidity preference among founders; where managers worry about hitting all of their financial metrics to earn the largest bonus and push financial ratios, founder led firms are usually more motivated by institutional preservation and capitalized themseves much more conservative.
I understand that it was tough to get financing in late 2008 and early 2009. If you had to roll over financing of anything, it was tough. If you didn't have months of expenses in cash, you could get crushed; but I simply don't believe that we have dozens of children of small business owners using day trading to effect World Socialist Revolution.
Alas, we also don't have a media environment interested in questioning this stuff, either. The stories are "too good" to check.
