GameStop: What if they’re right? A question for Freetrade

While a gentle jaunt through the Freetrade Community pages provides a relatively calming antidote to the frenzied Gamestop speculation you’d find on Reddit, it’s difficult to avoid asking yourself the question: What if they’re right?
While the hype can get a little embarrassing at times as excited teenagers declare that a million dollars a share is now their ‘floor’, it’s worth considering even for a moment the implications for Freetrade on the outside chance that they’re right
It’s absolutely apparent that buying shares in GameStop isn’t a run of the mill trade. Firstly, the stock price has long since parted company with the fundamentals and it’s pretty clear that something unusual is afoot.
For the sake of argument, let’s imagine that the Mother Of All Short Squeezes is imminent. Where would that leave Freetrade?
If you’re one of the tens of thousands of Freetrade customers who are suited and booted for a rocket trip, you want to know the company already has its mission plan in place, right?
$GME is one of the most popularly traded stocks in Europe this year, so it’s inevitable that a huge number of Freetrade customers would be depending on the company to maximise their returns IF the improbable happens.
So, what’s the plan? There’s no room for error when we’re in outer space.
Will selling limits be removed to maximise returns? Are custodial arrangements battened down? Should there be extra fees to cover any extra costs? What else do we need to prepare for, just in case?
It may never happen. Maybe it’s the Millenium Bug 2. At this point, nobody knows. But the time to plan, just in case, is now. Please share your thoughts and Freetrade, if you’re listening, we’re all ears.

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Why would the selling limits need to be removed? If by some miracle the stock does get really high, just sell in £9900 chunks at a time. That sounds like a reasonable strategy anyway. If you’ve made that much money, you’d already have easily covered your costs and it’d leave you a lot left over to see which direction the price went in next. Presumably if you’re confident it’ll get to something where this situation is an issue, you’re confident it could go higher still.

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If a squeeze happens and the stock reaches extraordinarily high levels then selling limits would compromise the seller’s ability to optimise their returns. Bear in mind, you’d expect some volatility.

What if an asteroid hits earth? I hope freetrade takes precautions to secure my stocks in the improbable event this happens. :thinking:

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My theory is it won’t “suddenly” hit 25k and if it goes even remotely close FT will react in time. FT are very vocal that this is a platform for long term investment and not day trading type. The amount of noise on a hypothetical problem that the team are probably well prepared for is insane really.
FT will have rules in place for very good reasons that us customers won’t be privy to and for us to expect them to change their model for us in case something happens when they have said they would react before it got to that seems unfair.

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I don’t think the share price hitting 25k is the problem. What if people own hundreds of shares or thousands of shares?

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Actually, I would expect Freetrade to have a disaster recovery plan. Perhaps not one that covers asteroids, right enough.

The relevance of the context in this case, however, is that a possible short squeeze would have a DIRECT impact on Freetrade’s business.

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Not that I have any stocks at all, but if I had bought in at say $50, I’d probably sell half at $200, half of the remainder at $500, half again at $1000, $5000, $10000, $20000.

Each one of those sales who have netted you more money than the previous one, and after the first it’d all have been free money anyway.

Sure you could optimise it further, but given that the genuine value of the company is pretty low, I think it’s pretty greedy to hold on further, and if you’re disappointed about not maximising it, then you’re gonna be in for a much worse shock when the inevitable happens and it ends back at a couple of dollars per share.

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Precisely. I would confidently predict that many Freetrade users have significant holdings in $GME.

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I would actually say FT should try and discourage GME gambling as there will be many losers if they are holding out for 25k etc. For long term success FT need rational long term investors or they will find a big exodus when this story eventually ends, good for some bad for others.

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A short squeeze isn’t about the value of a company. It’s about benefiting from the infinite risk assumed by the shorter.

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I agree. But Freetrade has to prove to its customers and prospective customers that it can safely manage their market returns.

For example, TESLA shares have enjoyed a huge level of return that is difficult to evaluate by traditional metrics. Would you expect those to be capped by the platform?

Well, yes and no. As long as people are holding their shares, there’s a good chance the broker will be prepared to lend out those share to someone else a bit longer to cover the short position. So the brokers are earning even more in the short term, and nobody else wins because the people who have paid for the shares aren’t realising their gains yet. And as soon as they do, the pressure on the short will relax.

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The FT team have said they would react if any spikes happened and I trust them as I have no reason not to. As I said they always are open they are a long term investment platform and with this in mind they will react if a stock starts creeping up to evenly remotely close.
Now I may be totally wrong but those implying it will hit 25k at a mins notice are being unrealistic and panicking over a potential issue that won’t happen. And I go back to FT said they are monitoring and will react.

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Are people still going on about this? the short interest is like 28% now, how is a squeeze of that magnitude gonna happen?

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When the shutdown occurred last time they worked all weekend to fix it. Assuming all the issues above are ignored, the original squeeze was said to take 6 days. I would assume they’d work another weekend if there were potential millions on the line. Its also not as if they don’t know the solution, its just implementing it.

But let’s be honest, the ship has probably sailed on $25k a share.

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Damn it. I was counting on it to buy that house across the singing creek

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Looks like WealthSimple are removing their limits.

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It looks like what they’re saying is in a scenario where it needs raising, it will be raised. Exactly what Freetrade have confirmed.

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That is 100% how I read it as well! :joy: :+1: