Courtesy of Pam Martens
Welcome to the casino where the house always wins. One day after the U.S. Senate Banking Committee held a wide-ranging hearing on the price manipulation that is occurring in the shares of GameStop and other meme stocks, the high frequency traders and hedge funds and Dark Pools that are making a killing on this manipulation poked their fingers directly in the eyes of Senate lawmakers. They put on a wild trading show yesterday that basically said, “catch us if you can.”
GameStop is not some penny stock operating out of a boiler room in some grimy backwater of Wall Street. GameStop is a New York Stock Exchange listed stock. It has a market capitalization of $18.48 billion. But the brazen manipulation of its stock, as both the House Financial Services Committee and Senate Banking Committee conduct investigative hearings into who’s behind the manipulations, speaks volumes about how little these actors think they have to fear from Congress, the SEC and the new U.S. Attorney General, Merrick Garland, whom the Senate confirmed yesterday.
GameStop opened for trading yesterday morning at $269.43. It then began an ascent that took it to $348.50 by approximately 12:17 p.m. Then, as if someone had rung a bell, heavy volume selling came in and the stock plunged 176.5 points in the span of 23 minutes, touching its low of the day of $172. By the closing bell, GameStop shares had climbed their way back to $265.00.
High frequency traders can make a fortune on this kind of volatility as can option traders. Market makers, who benefit from a widening spread between the bid and ask as a result of the volatility, also stand to clean up.
Over the span of yesterday’s trading session, 71,570,566 shares of GameStop were traded – which is 26 million more shares than GameStop’s float, that is, the number of outstanding shares available for trading. The high-volume trading at midday and the appearance of a concerted effort to plunge the share price at 12:17 p.m., strongly suggests the action of sophisticated, big money traders, not small retail traders hanging out on Reddit.
What happens with GameStop and other similarly manipulated meme stocks is critically important to all Americans. Rachel Robasciotti, founder and CEO of Adasina Social Capital, was a witness at the Senate Banking Committee hearing on GameStop on Tuesday and explained why it matters to all of us:
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