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Gamestop trading action pits powerful against powerless

27 January 2021
Dan Ackermann
Data: FactSet; Chart: Axios Visuals

A popular rebellion, organized by the powerless against the powerful. It might have failed in Washington, but it certainly seems to be working on Wall Street.

Driving the news: The market value of GameStop closed at more than $10 billion on Tuesday, on record volume of more than $26 billion.

  • The winners: A ragtag group of traders from Reddit and TikTok, led by a man calling himself “Roaring Kitty.”
  • The losers: Hedge-fund short-sellers wh0 are learning John Maynard Keynes's lesson the hard way — "The market can remain irrational longer than you can remain solvent."

How it works: Thanks to Robinhood and other stock-trading apps, trading options in GameStop (or BlackBerry, Bed Bath & Beyond or any other smallish company Wall Street traders have bet against) is easy, fun, and carries an irresistible commission of exactly $0.

  • Giant hedge funds like Melvin Capital now find themselves at the mercy of thousands of small investors using the internet to coordinate their buying attacks.

The bottom line: Short-selling — betting that a company's stock is going to fall — is a crucial element of efficient markets. But, thanks to Reddit, it has also never been more dangerous.

  • Wall Street veterans say the newbies' lack of experience and diversification mean they’ll eventually get crushed by their trades.
  • So far, however, the small guys are laughing all the way to the bank.

Transcripts show George Floyd told police "I can't breathe" over 20 times

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Newly released transcripts of bodycam footage from the Minneapolis Police Department show that George Floyd told officers he could not breathe more than 20 times in the moments leading up to his death.

Why it matters: Floyd's killing sparked a national wave of Black Lives Matter protests and an ongoing reckoning over systemic racism in the United States. The transcripts "offer one the most thorough and dramatic accounts" before Floyd's death, The New York Times writes.

The state of play: The transcripts were released as former officer Thomas Lane seeks to have the charges that he aided in Floyd's death thrown out in court, per the Times. He is one of four officers who have been charged.

  • The filings also include a 60-page transcript of an interview with Lane. He said he "felt maybe that something was going on" when asked if he believed that Floyd was having a medical emergency at the time.

What the transcripts say:

  • Floyd told the officers he was claustrophobic as they tried to get him into the squad car.
  • The transcripts also show Floyd saying, "Momma, I love you. Tell my kids I love them. I'm dead."
  • Former officer Derek Chauvin, who had his knee on Floyd's neck for over eight minutes, told Floyd, "Then stop talking, stop yelling, it takes a heck of a lot of oxygen to talk."

Read the transcripts via DocumentCloud.