One the most bizarre, interesting, exhilarating and frustrating trading sagas in the past decade has been the rise and fall of GameStop (GME). Earlier this year short interest in GME exceeded 100%. I never knew you could sell short more than the number of shares outstanding, but if there is a way to manipulate a stock, hedge funds will find one. The short interest represented pure greed and they paid for it. Reddit and Wall Street Bets rounded up millions of shareholders to acquire GME on they other end of the short bet. Hedge funds were forced to cover, driving the share price higher. However, the Reddit brigade held onto gains. Short covering begot more short covering and the next thing you know, GME was approaching $500 per share – up over 50x.
Senator Elizabeth Warren, the SEC and other lawmakers got involved to halt sales of GME – something never thought I would see in my lifetime:
Warren responded to the recent developments on Twitter by writing, “With stocks soaring while millions are out of work and struggling to pay bills, it’s not news that the stock market doesn’t reflect our actual economy.”
Warren, who has repeatedly levied criticisms against big banks and firms on Wall Street, went on to say in a follow-up tweet, “For years, the same hedge funds, private equity firms, and wealthy investors dismayed by the GameStop trades have treated the stock market like their own personal casino while everyone else pays the price.”
“It’s long past time for the SEC and other financial regulators to wake up and do their jobs,” the Democratic senator continued. “With a new administration and Democrats running Congress, I intend to make sure they do.”
This move helped drive down the price of GME, allowing shorts to cover. It may have saved the financial system from collapsing. Several clearing houses were having trouble clearing trades, and raising capital to support the volume.
The current target for short sellers in Endo International, the generic drug maker. Endo also sells pain-related medicines. It being sued by governments pursuant to the opioid crisis. The suits have been going on for four years now, and lawmakers do not appear in a hurry to resolve them. ENDP may never trade a fair value until opioid litigation is resolved. Shorts have sold 23 million shares short – and counting. This selling pressure has drive ENDP below $4 per share, simply because hedge willed it.
ENDP’s cellulite treatment is worth $35 per share alone. Endo’s share price is criminally low, and there is no relief in sight. When hedge fund managers were losing their shirts, Elizabeth Warren stepped in to save them. When millions of retail investors have to face unending opioid litigation and criminal short-selling, all you hear are *crickets* … where is Elizabeth Warren now?