The situation was becoming increasingly interesting.
ortex's short interest index was visible to Chen Pingjiang, to retail investors, and thus also to short sellers.
Chen Pingjiang saw hope for a comeback, retail investors saw hope for a crushing blow against short sellers, and short sellers weren't idle either.
Things having come to this, there was only one way to go: all out.
If the stock were only in the hands of Chen Pingjiang and the short sellers, then the short sellers would certainly panic and front-running would occur.
Just like Porsche's acquisition of Volkswagen, the stock price would be pushed to astronomical levels.
Because the short sellers knew that the shares in Chen Pingjiang's hands would not be released.
But in this long-short battle, there was also a third party!
This was the crucial factor.
Without this group of retail investor 'leeks' like Tom, the short sellers wouldn't have been so eager to naked short sell!
But precisely because of this group of retail investor 'leeks', the short sellers felt they might not die!
They only needed to further drive down the stock price, force retail investors to leave, hand over their shares, and then after buying the shares at a low price, the game could continue.
This was a three-way contest.
The situation had become Renren.com + retail investor 'leeks' VS Wall Street short sellers!
The Wall Street short sellers, to prevent a short squeeze, furiously hammered down prices.
The Renren.com stock price dropped directly to $129.63 the next day, falling below the $130 mark for the first time.
The situation was extremely tense!
Chen Pingjiang's share accumulation efforts were still ongoing, but at this point, he was no longer the key force; at most, he was a baseline.
The crucial swing power lay with the retail investors.
Things having come to this, the short sellers faced only three outcomes.
One, hold out to the end, continuously increase selling, and force retail investors out of the market.
Two, cut losses, forcibly close positions and return shares to lenders.
Three, lenders believe you might not be able to return the shares, and forcibly demand that you buy back shares to return to them.
The first outcome meant huge profits.
The second outcome meant conceding defeat on the spot, with small losses.
The third outcome meant a short squeeze, with huge losses.
November 17th.
In just three hours that morning, Renren.com's stock price surged by 5%. More and more retail investors poured in; after seeing the short interest index, they increasingly felt there was a win to be had in this round.
Wall Street short-selling institutions were not to be outdone and began to intensify their short-selling efforts.
On the afternoon of the 17th, the stock price remained in a sideways trading pattern. The long and short sides remained in a stalemate until closing, and the short sellers breathed a sigh of relief.
The closing price for the day was $133.13.
What a spectacle!
The long and short forces were battling fiercely!
Many onlookers were stunned.
......
That evening, several major short sellers gathered.
Carson Block of Muddy Waters, Steve Cohen of hedge fund Point72, the head of the renowned short-selling firm Citadel, the hundred-billion-scale Melvin Capital, Einhorn, and of course, Andrew of Citron.
"Gentlemen, let's hear your thoughts. The situation must be turned around; if it's not reversed even for a day, we won't be very safe."
Andrew shrugged indifferently:
"Anyway, Renren.com's stock price has already been hammered down by almost forty dollars. We've made a profit, it's just a matter of how much. Even if we close our positions now, we'd still make a small profit."
Steve Cohen scoffed and shot him a glance:
"Easy for you to say. If you front-run, you'll become infamous on Wall Street. This is like a wartime deserter. The situation now is a short squeeze. So many of us cannot run away together; only by driving out the retail investors can we survive, and at the same time, directly smash Renren.com's stock price to the bottom. We'd only make a few pennies by pulling out now."
Plotkin, the founder of Melvin Capital, nodded:
"We still need to use some tactics against the retail investors. If we can't force them out in the market, we'll force them out from outside the market."
Carson smiled and said,
"Buddy, if you have any clever strategies, speak up, there are no outsiders here."
"First, we will extensively publish negative news and bearish sentiments about Renren.com on Twitter. Carson, don't you have a follow-up report? Publish it together.
Second, find an internet army to infiltrate their forums and divide the retail investors.
Third, find Tom and tell him to stop talking nonsense.
Fourth, temporarily shut down WSB, the retail investors' main base.
Fifth, contact those retail trading platforms and forbid them from buying Renren.com's stock."
As Plotkin finished speaking, everyone present wasn't surprised and smiled.
This was the real Wall Street!
What if they couldn't win without flipping the table?
They were just 'leeks' anyway.
They had money and connections, so even if investigated, they feared nothing.
"I agree!"
"I agree too!"
"..."
November 18th was also the last trading day of the week for US stocks.
After the morning trading session, Renren.com's stock remained in a sideways trading pattern.
The sudden change occurred at 10 AM.
Citron founder Andrew was the first to post on Twitter: [To be honest, Renren.com's stock price is really too high. I think it's only worth $80 at most.]
Then, Muddy Waters founder Carson released a new short-selling report regarding Renren.com. In the report, he pointed out,
"Renren Entertainment Group should have been a wholly-owned subsidiary of Renren.com, so why is Renren.com only a minority shareholder while Chen Pingjiang himself is the major shareholder? Is there a possibility of embezzling company assets and harming shareholder interests?"
To put it plainly, it accused Chen Pingjiang of abusing his position at Renren.com and violating his fiduciary duties to the company and its shareholders.
At the same time, founders of multiple short-selling firms and economic analysts reiterated their bearish outlook on Renren.com.
Renren.com's stock price fell in response.
Just one hour after opening, a flash crash!
In the WSB forum.
The 'leeks' watched Renren.com's stock price flash crash, and for a moment, they panicked.
"Tom, where are you? What do we do now, speak up!"
"He wasn't online yesterday, don't know where he went."
"Tom is a liar, he tricked us into boarding, maybe he's fled."
"..."
Amidst everyone's desperate calls, Tom and his wife hid in an inconspicuous motel.
"Some short sellers found me and told me not to talk nonsense, or I'd be in trouble. So I got scared and changed locations."
When everyone saw Tom reappear, they finally breathed a sigh of relief, and then in the forum, they started cursing the short sellers.
Just as Tom was about to arrange the next steps, he suddenly noticed a message that the forum could not connect.
At first, he thought it was his network, but after trying to connect to other websites, he finally confirmed that their home base had been shut down.
His friend Jim sent a message:
"The reason given for WSB forum's shutdown is 'glorifying violence and posting incorrect market information'."
"FUCK! These dirty sons of bitches."
Tom couldn't help but be angry. From simply acting for money at the beginning, he later used his own fifty thousand dollars to buy Renren.com's stock...
He had thought the short sellers would be dirty, but he never expected them to be this dirty!
Pulling the network cable at the slightest disagreement!
Calming down, Tom quickly used his Facebook to contact friends, telling them to hold on, and those who could, to continue buying.
"Guys, trust me, this is the short sellers' dying counterattack. As long as we hold off this wave, we win. Using all their sell orders, sooner or later they'll have to buy back, and once they buy, the stock price will rise!"
However, to everyone's surprise, when they tried to buy Renren.com shares through their trading software, they found they couldn't!
As soon as they clicked 'buy', an "ERROR!" popped up on the screen.
"We are sorry – this order cannot be executed!"
What was even more ridiculous was that some investors posted more information on Twitter.
"Shit, they even removed Renren.com's stock ticker from the trading platforms, yet Wall Street institutions were unaffected; they could still short sell!"
Meanwhile, on financial news channels, a major short seller accused the media:
"These barbaric individuals are completely unruly; this is simply malicious riot. What rule-abiding investor would frantically push up a stock that is being shorted? Isn't this going against the market? Such actions, disregarding market conditions, fundamentals, and trends, are simply rogue behavior."
And at this moment, Renren.com's stock price, due to a large number of retail investors being unable to buy, suffered severe damage to its long power and began a nosedive!
$126.47!
$123.95!
...
"Too dirty!"
Chen Pingjiang shook his head, looking at the information on Twitter:
"If they can't win, they just pull the network cable? Well, Wall Street has always had this modus operandi, so it's not surprising."
On the other end of the screen, Bo Housheng grew anxious,
"Chairman Chen, what do we do now? The long's forums are closed, and stocks cannot be bought. Our active forces have been dispersed, and more and more people will sell their shares as they watch the price fall."
Chen Pingjiang shook his head:
"There isn't much time left until closing; even if they could buy, it wouldn't help. I already know what to do."
After speaking, Chen Pingjiang began to rant on Twitter.
[You can't sell a house you don't own, you can't sell a car you don't own, but you 'can' sell stocks you don't own!? This is outrageous—short selling is a scam.]
[If everyone cannot buy Renren.com shares using American trading platforms, then use Canadian or Hong Kong ones!]
Unfortunately, Chen Pingjiang's barrage of posts could not push Renren.com's stock price up.
By the close of trading that day, Renren.com's stock price was $124.25.
The next two days were Saturday and Sunday.
Chen Pingjiang gave a wry smile, realizing that on someone else's turf, he truly couldn't outplay the opponent.
Because they were just too dirty.
Later that day, Eastern Time.
A user on the WallStreetBets forum published an open letter denouncing Wall Street institutions, represented by Melvin Capital:
"You represent everything I hated during the financial crisis. You are a company that profits by exploiting other companies and manipulating markets and the media."
The user believed that these Wall Street institutions caused immense suffering to millions of ordinary people during the 2008 financial crisis, yet received no punishment and were even bailed out.
Now, they were openly illegally shorting individual stocks like Renren.com and engaging in market manipulation, having learned absolutely no lessons from the crisis.
The trading platforms also came forward to explain, stating that the move was to protect investors, fearing retail investors would lose money, and to restrict users from buying stocks with violent price fluctuations and frequent trading.
This was to meet the clearing companies' suddenly increased tenfold deposit requirements.
Inside Dongjiang's trading room, there was dead silence; the atmosphere was extremely heavy, you could hear a pin drop.
After a long while, Bo Housheng on the screen pondered and said:
"These retail investors are unreliable now. If the stock price cannot be pushed up by Monday, more and more people will sell their shares. Then the short sellers will return the shares to the brokers, and there will be no short squeeze."
"But... at present, we cannot push up the stock price with our own strength alone. Not even one or two pieces of positive news would be enough to make it rise."
The situation had become clear by this point.
Renren.com's odds of losing were over 90%!
This was actually a conservative figure; from Bo Housheng's years of experience, this number could be as high as 99%.
Originally, with a large number of retail investors supporting the market, Renren.com couldn't win in the short term, but was sure to win in the long term, because short-selling firms would always have to buy back shares, which would actually push up the price.
But now, circumstances had changed!
Once retail investors fled in large numbers and short sellers kept dumping orders with no one to buy, it wouldn't be impossible for Renren.com's stock price to drop below $100 when the market opened next Monday!
Everyone's heart was asking.
What to do!?
Chen Pingjiang frowned and thought for a moment, then suddenly shifted his gaze to Li Xi.
"If I ask you to be the Chairman of Renren.com, do you think you can handle it?"
Li Xi was stunned by the question, not quite reacting:
"Chairman Chen, why do you want me to be the Chairman? I definitely can't handle it."
"No!" Chen Pingjiang gazed at him intently, "You must be able to!"
Everyone present, including Bo Housheng on the other side of the screen, was somewhat confused.
At a time like this, Chen Pingjiang was still asking such questions; he couldn't possibly be thinking of fleeing at the last minute, could he?
"Chairman Chen, I don't understand."
Chen Pingjiang smiled. What was there not to understand?
"At this point, it's almost impossible for Renren.com's stock price to rise using conventional methods. But the deadlock is here: it must rise to give retail investors confidence, so they won't sell their shares, but instead buy aggressively."
He paused and continued:
"Taking risky moves, we can only win by surprise."
Bo Housheng asked,
"Chairman Chen, what exactly do you have in mind?"
"Announce privatization!"
Chen Pingjiang slowly uttered the words.
Bo Housheng on the opposite side was greatly shaken:
"Chairman Chen, is it real privatization, or fake privatization?"
Chen Pingjiang laughed heartily:
"Nonsense, of course it's fake. Where would we get so much money for real privatization? We haven't even earned that much money in US stocks; we might even lose money if we privatize."
"But if it's fake privatization, you'll be accused by the SEC. The charge will likely be suspected of securities fraud. You won't go to jail, but you'll definitely have to pay compensation. And once the penalties are implemented, Renren.com's stock will still fall."
Chen Pingjiang shrugged indifferently:
"So what? If it falls, it'll be a long time from now, but the time before that will be enough for me to crush the short sellers! And I can make a fortune in the process."
Bo Housheng didn't know whether to laugh or cry, but had to admit the move was truly ingenious:
"That's true. Once the privatization news is out, the stock price will certainly surge. Retail investors definitely won't sell; instead, a large number of retail investors will buy. This will further push up the stock price, and short sellers will only be able to face a short squeeze.
With the skyrocketing stock price, they will be skinned alive in a few days. When the stock reaches a high point, Tianyuan Capital's purchased shares can also be cleared opportunistically, making a net profit."
(End of Chapter)