Billionaire investor Carl Icahn began shorting GameStop during the height of the ‘meme stock’ frenzy around January of 2021.
Carl Icahn still holds a large short position in GME stock, according to people familiar with the matter.
Icahn started building the short position when GameStop was trading near its peak of $483 per share and still holds a large bet against the retailer’s shares, said people, asking not to be named due to the matter being private.
The billionaire investor who has added to his position from time to time is betting that GameStop’s stock isn’t trading on its fundamentals and will continue to fall, insiders said.
Bed Bath & Beyond’s CFO Gustavo Arnal died shortly after facing lawsuit claims of insider trading with GameStop’s Ryan Cohen.
His death occurred days after the company had announced it would be closing 150 stores and cutting 20% of its corporate staff.
The incident occurred less than two weeks after the executive, 52, was named in a federal class-action lawsuit on allegations of federal securities fraud, insider trading, and breach of fiduciary duty, according to court documents, per Business Insider.
The Chief Financial Officer was found dead on Friday after falling from the 18th floor of a New York City apartment building.
Arnal was cited in the suit along with activist investor and GameStop chairman Ryan Cohen, who the lawsuit claims collaborated with the CFO in a “fraudulent scheme to artificially inflate the price of Bed Bath & Beyond’s publicly traded stock.”
The lawsuit claims Cohen — who is also the co-founder of Chewy and chairman of GameStop — approached the CFO about his “pump and dump” scheme in March 2022, and “convinced Gustavo that their plan would be a mutually beneficial one.”
BBBY CFO & GameStop Chairman allegedly collude in pump and dump scheme
“Under this arrangement, defendants would profit handsomely from the rise in price and could coordinate their selling of shares to optimize their returns,” the lawsuit states.
Arnal allegedly worked with JPMorgan, which is listed as a defendant in the suit on claims the bank “aided and abetted” the plan by “enabling Cohen to use JPM’s accounts to effectuate such transactions and otherwise launder the proceeds of their criminal conduct.”
Ryan Cohen made a profit of $68.1 million from his stake in Bed Bath & Beyond.
Bed Bath & Beyond was one of the so called ‘meme stocks’ that was halted last year alongside AMC Entertainment stock and GameStop after retail investors had aimed to squeeze short sellers from their positions.
Investors and shareholders are still figuring out how to process this tragic death.
Leave your thoughts down below.
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The stock has made a massive climb after some serious consolidation. It looks like GameStop is prepping itself for another gamma squeeze.
Could we finally see that GME squeeze everyone’s been waiting for?! I think its time.
See, GameStop’s short interest is still rather high and not all short sellers closed their positions back in January.
This means the stock still has loads of room to go bonkers.
What is a short-ladder attack?
A short-ladder attack is a strategy performed by short-sellers where they bid on the stock at a significantly lower sell price and purchase it from one another.
Thus, driving the share price lower.
How do you spot a short-ladder attack?
When the stock knows nothing but gains, but something keeps pushing it down until over and over again, that’s when you’ll know.
Why GameStop has potential for a second short squeeze
Short-sellers didn’t learn their lesson from the first time. GameStop stock is still being heavily shorted.
With GameStop becoming a technology company, its value has not only significantly gone up but it now has even more potential to keep driving its momentum.
Retail investors have a strong conviction towards GameStop investment. This means they’re not willing to sell the stock which in turn creates a supply and demand scenario with short-sellers who have to close their positions.
Short Share Availability and Short Borrow Fee Rate
You can see GameStop’s short share availability and short borrow fee rate using this link (via. Short interest data)
This number of course changes every day and can be expected to rise as hedge funds continue to short GameStop stock.
However, the short borrow fee rate isn’t a catalyst for GME to squeeze.
I’m excited for my subcommunity that holds both GME and AMC stock because both are about to skyrocket past Pluto.
GME Stock Analysis
Roensch Capital goes over the data for trending stocks.
The information is very easy to understand and gives you insight in the market from an analysts perspective.
Be sure to check out recent videos as they’re being uploaded to stay updated with any changes that occur in the market with GameStop.
It is important to note that I am not a licensed financial advisor.
Like many traders and self taught investors, all speculation is based on educated estimations based on highly reliable analysis, patterns, and documented news charts.
Volume is key to a second GameStop short squeeze
Just like AMC, GameStop will need to see a continuous runup in share volume.
When retail investors continue to buy and hold GameStop stock, short-sellers shorting the stock eventually have to buy back the stock.
This demand and supply scenario results in various gamma squeezes.
The gains we’ve seen with GameStop have been a series of gamma squeezes, or incremental gains.
Usually what follows after gamma squeezes is a short squeeze if it has enough volume.
The volume of shares depends on how much retail investors are purchasing GameStop stock or selling it.
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How will a GameStop Dividend work?
GameStop plans to increase the number of authorized shares of Class A common stock from 300,000,000 to 1,000,000,000 in order to implement a stock split of the Company’s Class A common stock in the form of a stock dividend.
The stock soared more than 14% after hours moments after the announcement.
Several call options within $170-$190 are in the pocket to fuel massive gamma squeeze for Friday’s rally.
To say GME shareholders are excited is an understatement.
But GameStop shareholders aren’t the only ones who are excited.
The entire ‘meme stock’ crowd is happy to hear the news as most upswings have been in synchronicity with both GameStop and AMC.
GME stock is up more than 16% after hours while AMC which also closed red today is up more than 5%.
What type of dividend GameStop unveils is yet unknown, but a dividend usually comes in the form of monthly, quarterly, or annual compensation.
Investors are even speculating an NFT dividend could be underway.
However, this is a developing story so be sure to join the newsletter for immediate updates.
How does a stock dividend work?
Stock dividends pay shareholders a percentage from a company’s profits every month, every quarter, or annually, depending on the terms.
Shareholder will have two options when receiving stock dividends.
Cash out the dividend during every payment cycle
Reinvest the dividend back into the stock to accumulate more shares over time
If GameStop offers shareholders a traditional dividend (non-NFT), then shareholders will be able to use one of these two options.
How much investors earn every month, or every quarter will depend on how many shares an investor holds and on GameStop’s dividend yield.
The more shares of a company an investor holds means the more dividend yield is accumulated over a period of time.
A GameStop dividend could provide shareholders with a stream of passive income like most dividend stocks do.
Long terms stockholders tend to reinvest that dividend so that the number of shares they own compound over time, creating a snowball effect of increased value assets.
This is what Warren Buffett refers to as value investing.
So, how does a stock split work?
A stock split takes a share and splits it into two or more shares, dividing the share price by the number of splits.
This means for every share you own of AMZN stock you will receive 20 more shares when the stock splits.
AMZN stock is worth roughly $3,200 today.
If the stock split today and you only owned 1 share of stock, you will now have 20 shares each worth $160.
Owning 2 shares of AMZN stock would give you 40 shares valued at $160.
Tesla and Apple had stock splits earlier last year too.
GameStop’s stock split ratio is still unknown, but I will cover it as more information from the company is released.
What is the purpose of a stock split?
A stock split allows investors to purchase a company’s stock at much more affordable price.
Especially after a stock’s share price has surged to relatively high numbers.
Going back to Amazon as an example, while $3,200 per share is not feasible for most small investors, $160 per share incentivizes retail investors to buy the stock at a much lower entry point.
A GameStop stock split too could allow retail investors to buy the stock at a much lower price.
GameStop stock split explained
The company wants to increase the number of common stocks in the market from 300,000,000 to 1,000,000,000 to provide that capital to its shareholders in the form of a dividend.
So, it’s possible we don’t even see a traditional stock split (unless announced by GameStop).
The information we have available at the moment points towards this ‘dilution’ so-to-speak as a form of payment to GameStop’s shareholders in the form of a GameStop dividend.
GameStop’s board of directors has approved both stockholder proposals, but the stock dividend will be contingent (subject to change) on the final Board approval.
What does a GME stock dividend mean for short sellers?
The news of a GME stock dividend means retail investors will flood the market to buy GameStop, causing short sellers not only lose a lot of money, but to close their positions.
What happens to a short seller when a company announces a stock dividend?
If the stock is short on the record date, they will owe the dividend to their broker.
At this point a GameStop short squeeze is inevitable.
Shorts will be forced to buy back their shares to pay their brokers the dividend they’re entitled to once this proposal is executed, or they have the chance to close their short positions now before accumulating greater losses in the future.
Either way this plays out, short sellers are not in a good position right now.
Is GameStop a buy right now?
GameStop might be a little pricey at the moment, but investors buying in for a short squeeze have a chance at making a lot of money in the near-term future.
Are you a GME shareholder?
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GameStop let go of Boston Consulting Group (BCG) and the firm is now suing the retailer for $30 million in ‘unpaid’ fees.
BCG is now part of a scandal in a conflict of interest due to its connection to hedge fund and short seller Citadel.
GameStop said: “We do not believe it is in our stockholders’ best interests to pay the tens of millions of dollars sought by BCG, especially given their seemingly meagre impact on the company’s bottom line. We will fight this suit and are proud that GameStop no longer utilizes the likes of BCG for any services.”
BCG declined to comment.
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Chairman Ryan Cohen takes a jab at BCG
Chewy Founder and GameStop Chairman said on Twitter “the overpriced consultants at BCG are picking a fight with the wrong company.”
He later tweeted the following: “The only ones more useless than overpriced consultants are the ones that hire them”, referring to Citadel’s ex-BCG employees.
That’s right, numerous consultants over at BCG were later hired by Citadel.
Retail investors are flooding @BCG on Twitter for infiltrating GameStop under the old board before Cohen came in.
BCG was hired to bring GameStop out of its ‘slump’ when it was struggling, according to the lawsuit.
The consulting group says it spent “tens of thousands of hours” on the project and “overachieved” by creating more profit improvement opportunities.
“It is confounding that the high-priced consultants at BCG claim to have delivered hundreds of millions in value for GameStop during a period when share price, sales and debt were at perilous levels,” GameStop said in an emailed statement.
GameStop said it’s “proud” it no longer uses the consulting group’s services.
Was GameStop infiltrated by BCG?
It’s incredible how these consultants seamlessly ended up at GameStop only to join Citadel afterwards.
For starters, GameStop’s Vice President and head of Corporate Strategy & Analytics Jackson Speakewas a consultant and project leader at BCG before joining the game retailer.
He also worked a Bain & Company, a company that would acquire failing businesses such as Toys R Us, and ‘bust them out’.
Except they wouldn’t bust them out, they would buy the companies using the struggling companies own credit.
This scheme is known as a Leveraged Buy Out (LBO).
Once Bain had control of the businesses, they would bring on their own board members and executives.
These executives would then pay themselves large bonuses prior to defaulting the business.
Hedge funds such as Citadel would then drive the company down to zero and keep all the money they made from short selling the stock.
Was this ring of manipulators attempting to take GameStop down?
Let’s dive deeper.
Citadel employees with BCG backgrounds
A few years ago, BCG was retained by the SEC due to concerns relating to organizational chain of command, the effect of high frequency trading, hiring and personnel practices, and oversight and reliance on self-regulatory organizations.
Leave your thoughts below.