IN RE January 2021 Short Squeeze Trading Litigation — Court Filing, Doc. 585-6
Summary
Exhibit 39 to Document 585 in Case 1:21-md-02989-CMA (Document 585-6), entered on the FLSD docket June 30, 2023: a six-page Seeking Alpha printout, dated 3/25/23 and bearing the label Exhibit 000115 Fischel, of "When Will The Ride End? Analyzing GameStop Short Squeeze By Looking At History (NYSE - GME)" by Hugh Akston Investments, published Feb. 01, 2021. The article compares the GameStop squeeze with earlier short squeezes, finding that the average squeeze in its data set lasted approximately 12 trading days (Volkswagen the longest at 31), that the average one-day reversal was -30% against GameStop's -44% decline on January 28th, and that a squeeze typically loses -50% within the next 3-4 days once exhausted. The printout's header shows a price at publication of $56.25 and a last price of $23.98, a change of -57.37%.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
- Date
- 2023-06-30
Cite this document
“IN RE January 2021 Short Squeeze Trading Litigation — Court Filing, Doc. 585-6.”
Original at archive.org, dated 2023-06-30. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2023-06-30-covid-era-misc-f14f97dc-1/
, SHA-256 f14f97dcb864612ba46efd9ecdb2d98f0868bec2348608af2119da23d0dacced.Full text
Case 1:21-md-02989-CMA Document 585-6 Entered on FLSD Docket 06/30/2023 Page 1 of 6
EXHIBIT
39
Case 1:21-md-02989-CMA
3/25/23, 4:30 PM Document
When Will The Ride End? 585-6
Analyzing Entered
GameStop Short on FLSD
Squeeze By Docket
Looking 06/30/2023
At History (NYSE
- GME) Page
- Seeking2Alpha
of 6
Home > Latest Articles Editors' Pick Services Sc:
When Will The Ride End? Analyzing
GameStop Short Squeeze By Looking At
History
Feb. 01, 2021 10:35 AM ET Gamestop Corp. (GME) HTZ, VAL, VWAGY 100 Comments 15 Likes
Hugh Akston Investments
1.85K Followers
About this article
Ticker Analyst rating Price at publication Last price Change since publication S&P 500
GME $56.25 $23.98 -57.37%
Summary
• Parabolic moves feel great, but they don't last forever. At some point, you need to
get off the ride and lock in the gains.
• Short squeezes are not based on company fundamentals. Rather they are driven
by human behavior and technical factors.
• Short squeezes typically don't last long.
• No short squeeze has even taken a hit like GameStop sustained on January 28th
and kept the upward trend intact.
• When ashort squeeze eventually exhausts itself, the stock price typically declines
by -50% within the next 3-4 days.
Exhibit
000115
Fischel
1/5
Case 1:21-md-02989-CMA
3/25/23, 4:30 PM Document
When Will The Ride End? 585-6
Analyzing Entered
GameStop Short on FLSD
Squeeze By Docket
Looking 06/30/2023
At History (NYSE GME) Page
Seeking3Alpha
of 6 - -
A long time ago in a galaxy far, far away it was generally understood by investors that
stocks with high short interest underperform over time. The past two weeks
notwithstanding, it has typically been a poor strategy to invest in stocks with high short
interest. That prevailing wisdom got flipped on its head recently when the
WallStreetBets crowd ignited perhaps the greatest short squeeze in history with
GameStop (NYSE:GME). While parabolic moves feel great, they don't last forever and
at some point, you need to get off the ride and lock in the gains. This post will look at
the previous acute short squeezes that we've witnessed in 20 years of participating in
the stock market and what it could mean for GameStop and the rest of the squeeze
plays.
Short squeezes are not well understood by market participants or academics because
they are rare, hard to quantify, defy conventional wisdom, and are impossible to predict
advance. GameStop has had a massive short interest in the stock for the past 10 years
and Reddit rock star, Keith Gill (a.k.a. Deep F**Val ue/Roaring Kitty) has been posting
about GameStop since September 2019. This squeeze could have happened at any
time, but it didn't. It took aconfluence of events to occur at exactly the right time to
create a perfect storm.
Chart 1: GameStop Short Interest as % of Float
Ga,,.5I.p Cow. CMss A Monthly
325.00 131A001.57%LOOLIO PM ~MO I4t: lIMO Lcn 15.55 Chg: 30134%
- GnSlccCnOsA-8I%Sflo&
cm
100
90
90
70
90
SO
40
30
20
10
91 12 13 '14 '15 90 17 IO '19 '20
Source: Factset
2/5
Case 1:21-md-02989-CMA
3/25/23, 4:30 PM Document
When Will The Ride End? 585-6
Analyzing Entered
GameStop Short on FLSD
Squeeze By Docket
Looking 06/30/2023
At History (NYSE
- GME) Page
- Seeking4Alpha
of 6
It should be clear to everyone by now that short squeezes are not based on company
fundamentals. Rather they are driven by human behavior and technical factors. Given
that human behavior never changes, it is reasonable to assume that these short
squeeze episodes share some commonalities. The market participants experience
similar emotions at the various parts of the cycle and the technical factors (borrow
rates, margin requirements, etc.) follow asimilar arc.
With this underlying assumption that short squeezes share common traits, we have
analyzed below the previous short squeezes that we have witnessed firsthand. This is
certainly not an exhaustive list of all of the squeezes that have occurred. (If you have
any memorable, or traumatic, squeezes not listed, please leave the names and dates in
Comments section and we'll add them to the analysis.)
Note: price source Factset prices based on closing prices, days = trading days
Takeaway #1: Short squeezes typically don't last long.
The Volkswagen short squeeze took the longest amount of time to climax at 31 trading
days. The average short squeeze in this data set lasted approximately 12 days from the
onset to the peak. The start date is admittedly subjective, but we use Day 0as the last
trading day before the rapid advance begins. If January 27th turns out to be the high for
GameStop, the short squeeze looks "normal" from aduration standpoint at 10 trading
days.
Takeaway #2: The price movement we have already witnessed in GameStop is the
most dramatic short squeeze we have seen in 20 years.
3/5
Case 1:21-md-02989-CMA
3/25/23, 4:30 PM Document
When Will The Ride End? 585-6
Analyzing Entered
GameStop Short on FLSD
Squeeze By Docket
Looking 06/30/2023
At History (NYSE
- GME) Page
- Seeking5Alpha
of 6
People often talk about Volkswagen as the king of all short squeezes. While that is true
from a market cap perspective, Volkswagen was a much larger company to begin with.
From a pure price appreciation standpoint, we have never seen anything like the
current GameStop short squeeze. To expect "another shoe to drop" or further ascent
from here seems unlikely judging by history.
Takeaway #3: Short squeezes end when a violent reversal day breaks the upward
momentum.
The price action of the short squeezes in the data set follows afairly consistent pattern.
The squeeze goes parabolic over a period of days and then experiences a big one day
reversal as the buying frenzy exhausts itself. The average one day decline on this
"reversal day" is -30% for the data set. As a reminder, GameStop declined -44% on
January 28th Stocks never go straight up or straight down and that holds true in ashort
squeeze. Even during the melt-up phase of the squeeze, some of the stocks in the data
set experienced one day declines along the way. However, these declines were
typically small as buyers stepped in to cover on weakness. The largest one-day decline
that occurred without breaking the overall uptrend took place in Volkswagen when the
stock declined -23% in one day, yet rebounded afterward and continued to make new
highs. No short squeeze has even taken a hit like GameStop sustained on January 281
and kept the upward trend intact.
Takeaway #4: When ashort squeeze runs out of gas, the reversal is fast and
severe.
When ashort squeeze eventually exhausts itself, the stock price typically declines by
-50% within the next 3-4 days. Within our entire data set, the longest it took ashort
squeeze to lose -50% of its value was 6days for Real Goods Solar. Volkswagen
dropped -50% in only four trading days after it peaked. The full retracement of ashort
squeeze takes significantly longer. The boom/bust roundtrip took an average of 72
trading days to play out, which equates to 3-4 calendar months. As mentioned above,
stocks do not go straight up or straight down, so the path to normalization will be full of
head fakes, dead-cat bounces, and all sorts of other craziness.
4/5
Case 1:21-md-02989-CMA
3/25/23, 4:30 PM Document
When Will The Ride End? 585-6
Analyzing Entered
GameStop Short on FLSD
Squeeze By Docket
Looking 06/30/2023
At History (NYSE GME) Page
Seeking6Alpha
- -
of 6
History doesn't repeat itself, but it often rhymes. The stock market is impossible to
predict in the short run, but over time fundamentals and valuation matter. A strategy
based on chasing deteriorating businesses in hopes of igniting ashort squeeze does
not seem like asustainable long-term plan. With or without short-sellers, businesses
become obsolete and the creative destruction of the system replaces them with
something else. Invest accordingly.
This article was written by
Hugh Akston Investments
1.85K Followers
"one of the last great advocates of reason" We manage a hedge fund that utilizes value investing principles and
rigorous analysis. Prospective investors, financial reporters, etc. can reach us using the Seeking Alpha
Show More
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: The author and/or employer may buy or sell shares in any company mentioned, at anytime, without notice.
The information contained herein is believed to be accurate as of the posting date. Readers should conduct their own verification of
any information or analyses contained in this report. The author undertakes no obligation to update this report based on any future
events or information. This article represents best efforts to convey afact-based opinion. My conclusions may be incorrect. This is
not a recommendation to buy or sell any securities.
5/5
File and source
- File
- gov.uscourts.flsd.590042.585.6.pdf
- Size
- 2,188,647 bytes
- SHA-256
- f14f97dcb864612ba46efd9ecdb2d98f0868bec2348608af2119da23d0dacced
- Original
- archive.org