"There's one more condition. We must appear weak to the enemy, forcing the shorts into a trap, making them think they've made enough profit, then deliver the stocks to cash out and leave the market. At the same time, we'll secretly accumulate shares to further reduce the circulating shares in the market."
Bu Housheng slapped his thigh, exclaiming excitedly,
"Combined with Renren's share repurchase plan, the circulating shares in the market will become pitifully scarce."
When short institutions sold shares, Chen Pingjiang bought them.
It was perfect for them to drive down the stock price, allowing Chen Pingjiang to buy more circulating shares at the same price.
With the stock price driven down, the money Chen Pingjiang used to accumulate shares would be tied up, seemingly a huge loss, but this was no longer the key!
The accumulation of shares was merely a chess piece on the board; the ultimate goal was to reduce circulating shares.
Once the circulating shares became scarce to a certain extent.
Shorts would need to buy shares to return them, and market makers would also need to buy shares to hedge risks.
The stock price would be continuously pushed up; although not as exaggerated as a short squeeze, it could still achieve the same effect.
The fewer shares circulating in the market, the higher Renren's stock price would be. Everyone would want to buy, which would constantly push up prices!
Carrying this excitement, Chen Pingjiang finally allowed himself to go back to sleep.
The plan was set; now it only needed to be implemented step by step.
And the first step was to appear weak to the enemy.
November 15th.
Renren's stock price opened directly at a low of $150.32.
By the close of trading that day, Renren's stock price was $141.27, a further drop of 8.18% from the previous trading day, a total decline of 21.34% over two trading days.
It could no longer be described as merely "miserable."
Bu Housheng's share accumulation actions also became more secretive and gentle; he needed to acquire as many circulating shares as possible without alerting the enemy.
The market wasn't entirely filled with lamentations, but there were countless bearish sentiments.
"Renren's stock price can't go up. What a pity, it just started repurchasing shares."
"The positive momentum from the repurchase has almost been released. This move by the SEC is truly vicious. If the investigation had happened later, it wouldn't have been so bad."
"I advise everyone with chips to quickly throw them off the table, otherwise you'll be trapped."
"Has Chen Pingjiang admitted defeat? This doesn't match his style. He was incredibly aggressive yesterday, but today he's even posting less on Twitter."
"Haha, the SEC's investigation hit the snake in its vital spot. Yesterday he was just a fierce, fighting lion, seemingly ferocious but actually bluffing. Today the SEC came with a shotgun, and he couldn't hold up."
"I originally intended to hold on, but with no sound from Renren today, I've chosen to clear out my Renren shares to avoid being trapped."
"…"
Bearish voices were incessant.
This day was too long, making it difficult for Chen Pingjiang.
A deluge of private messages on Twitter and interview requests from various media outlets poured in like a tide, seemingly intent on engulfing Chen Pingjiang.
Especially that blockhead Carson Block, who was incredibly smug, furiously tweeting, almost directly taunting Chen Pingjiang.
[Chen, is your power out or your internet down today? Why aren't you speaking?]
[Haha, the poor tiger has had its fangs pulled out.]
[Facts have proven that my view is absolutely correct. Renren stock is not worth holding, and this SEC investigation might even bring big news.]
[I'm already building a position, planning to make some extra money.]
…
Chen Pingjiang: [Carson, has anyone told you that you're like a mad dog, just barking, it's annoying.]
After his first tweet of the day was sent out, the eyes of the world gathered to watch.
Everyone asked Chen Pingjiang what he thought of the SEC investigation and what other means he had to stop the shorts.
Chen Pingjiang thought, how can I see it? I'll see it with my head.
[These shorts are like grasshoppers in autumn; they won't be able to hop for many more days.]
However, few people seemed to believe Chen Pingjiang's words.
Because Renren's stock price had fallen too terribly.
According to Chen Pingjiang's previous style, if he had a move, he should have used it already.
After the market closed, Chen Pingjiang smiled and asked everyone,
"How was my performance today?"
Bu Housheng smiled and said,
"It was alright, but it still lacks a bit. The shorts haven't acted particularly crazy yet."
Chen Pingjiang helplessly spread his hands,
"Then I'll just have to step into the game myself and personally tempt them."
"Chairman Chen, what do you plan to do?"
"You'll see in a couple of days."
......
Meanwhile.
In an old neighborhood in Los Angeles, Tom listlessly watched financial news on TV, occasionally taking a sip of beer.
His heavily pregnant wife complained,
"Last month's bill arrived, dear, and we don't have money to pay it. And we don't have much food left. Prices are rising too fast, and our money is only enough to buy some discounted chicken thighs."
Tom looked guiltily at his wife, helplessly rubbing his face,
"Darling, I'll figure something out."
Since 2011, Tom had been ruined by the stock market's fluctuations, losing almost all his savings. Now he only had a few trapped stocks.
Tom hadn't expected to survive 2008 only to fall in 2011.
He had no formal job, considered a professional stock trader, a small retail investor; stock trading was his job.
So when his stocks were trapped, Tom's life collapsed.
Mortgage, car loan, insurance, utilities, internet bills, all suffocated Tom.
The phone rang. Tom looked at the caller ID; it was his good friend Jim.
"Hey, Tom, come out for a drink."
Tom sighed.
"Sorry, I'm not in the mood for a drink,"
On the other end of the phone, Jim said,
"Don't worry, brother, I'm treating you to a drink, and I'll introduce you to an opportunity to make a fortune."
Tom's heart stirred at this,
"I can be there in twenty minutes."
They were childhood friends, decades of friendship. Tom believed his friend wouldn't lie to him.
Upon arriving at the bar, Tom found his friend Jim. As soon as he sat down, he eagerly asked,
"Brother, what's the opportunity to get rich? You know, I really need money to improve my life right now."
Jim smiled, called a waiter to order Tom a drink, and then said,
"Buddy, there's definitely a chance to make money, but before that, you have to keep it absolutely secret, otherwise not only will you not make money, but we'll also get into big trouble."
Tom was stunned,
"Damn it, it's not drug dealing or anything, is it? Because I won't do that."
"Of course not, would I harm you? Of course, it's our old profession, stock trading."
Hearing his friend say that, Tom breathed a sigh of relief,
"That's good then. You've known me for more than a day or two, you know how tight-lipped I am. You know about your high school affair with the math teacher, and I haven't said a word about it until now."
"Cough, cough!" Jim choked on his drink, "Alright, buddy, I believe you."
After speaking, Jim waved, signaling his friend to sit closer.
"This matter is actually very simple. You've been trading stocks for many years and have considerable influence in the forum. Now a big boss is willing to pay five hundred thousand dollars for us two to do something."
"Buddy, just talk, don't talk halfway and hide the rest, it's maddening."
"Alright, we need to incite a group of people in the forum to buy Renren call options together. The more people, the better. The only thing to do is not to back down in the face of any pressure."
Tom's eyes lit up,
"It's that simple? I can get two hundred and fifty thousand dollars? I know this Renren stock; aren't they being shorted recently? Why would we buy call options?"
Jim smiled,
"That's not for us to consider. Our task is to rally people, to rally everyone to buy Renren call options from market makers. The other party first gave us one hundred thousand as startup capital, and the rest of the money will be transferred after completion. If we do well, there's an additional five hundred thousand dollar bonus."
Tom's breathing became heavy when he heard that.
That would be five hundred thousand dollars back and forth.
And the task was simple, just posting, which was as easy as drinking water for Tom.
After all, he had a small reputation in the circle, he just had bad luck recently.
"Remember, no matter who asks, we must deny any third party, as if there is no such person. The big boss also warned that the shorts might also cause us trouble, so in short, we must hold firm."
Jim said, patting his friend's shoulder, and handed Tom a bulging kraft paper bag.
After returning home, Tom was very excited. On the way back, he had carefully considered all possibilities.
"Currently, what can be confirmed is that this matter is not illegal, and it's not difficult to operate."
After thinking for a moment, Tom logged into the forum and posted his first message.
"Guys, I think I've found a good way to make money. Renren stock is currently facing short selling from many short institutions. I've observed this company; it's excellent. If we firmly go long, we can definitely beat the shorts."
In fact, if an ordinary person had posted this, probably no one would have believed it.
But the good thing was, Tom's identity was perfect; he wasn't an ordinary person.
He was the group owner of wallstre step, or WSB for short, which translates to Wall Street Bets in Chinese. The forum members were a group of speculators addicted to stocks and options.
They never believed in rationality and value investing; they all had a mentality of either getting rich overnight or losing everything overnight. WSB was almost the most extreme group of retail investors.
In simple terms, the people here were gamblers.
Soon after Tom's post went up, someone replied.
"Haha, Tom, if you had posted this in another group instead of wallstre step, you would definitely be considered a lunatic."
"Exactly, Tom, so many shorts have entered the market, and the stock price being driven down is almost a certainty. Isn't going long now just asking for death?"
"Yes, Tom, if you can convince us, we'll go long with you."
Tom thought for a moment and then posted a second message.
"The reasoning is simple, guys. This Chinese company doesn't have many shares circulating in the market itself, and now the company is repurchasing shares. With so many short-selling institutions selling their shares, what do you think will happen if we take over at this time?"
At this point, some people had caught on, replying excitedly,
"If we take over and hold on tightly, when the shorts need to return the shares, they'll find there aren't enough shares."
Tom: "BINGO! We can also buy call options, which can add leverage."
Group member: "Then market makers will also buy Renren shares to hedge risk and join us in going long, making the circulating shares in the market even scarcer."
A group of people enthusiastically discussed for a long time.
This also meant that Chen Pingjiang had found the right people; changing the group would not have achieved such an effect.
Many of these people worked, and when they got paid, they converted it into stocks.
They were veritable stock fanatics!
Now that someone was leading the way, their enthusiasm was instantly ignited.
These fanatics spread the word everywhere, just to get more people to participate and enjoy the carnival.
November 16th.
After the US stock market opened, Renren's stock price not only stopped falling but even dramatically began to rise.
This bizarre scene immediately caught the attention of many short institutions.
Because normally, Renren's stock price should have continued to fall slowly for a few more days; there was no reason for it to rise so quickly.
Various shorts investigated thoroughly and finally discovered, helplessly, that a group of ignorant retail investors were hindering their good deeds.
Could they tolerate this?
It is said that China's A-share market harvests retail investors, but US institutions are even more ruthless in their harvesting.
On that day, more sell orders were dumped.
By the close of trading, Renren's stock price had fallen below the $140 mark, settling at only $137.43.
A strange scene appeared.
The shorts' increased efforts not only failed to stop the power of retail investors but further stimulated this group of people.
Everyone come together to go long on Renren.
This phrase spread like an epidemic.
The impact achieved was something even Chen Pingjiang himself had not expected.
"Chairman Chen, Ortex just released the latest data. The short-selling index for our Renren stock has reached 10.2%. If we include off-exchange dark pools, I estimate this number could exceed 14%."
Chen Pingjiang was also stunned when he heard Bu Housheng say this,
"Isn't naked short selling prohibited? All our available equity is over 90%. Where did this 4% come from?"
Bu Housheng was also somewhat speechless,
"The SEC indeed prohibits naked short selling, but they came up with a cunning trick, creating similar financial derivatives. In short, the shorts borrowed shares that originally belonged to the longs from brokerage firms, and then one borrowed from another, and naked short selling was formed."
Chen Pingjiang was dumbfounded after hearing this.
No wonder the big US institutions are so ruthless; they actually dare to lend out custodial shares.
If you borrow your own, people have nothing to say, but you dare to borrow shares that don't exist in the market?
And then package them as financial derivatives, one borrowing from another!
For example, if a short asks UBS to borrow Renren shares, UBS says it doesn't have them but can help get them, then UBS turns around and asks JPMorgan Chase to borrow.
JPMorgan Chase doesn't have them either, so it uses the retail investors' shares in its hands to cover it first.
"This operation is truly daring. No wonder these Wall Street institutions are so aggressive."
Bu Housheng smiled and said,
"The retail investors' actions today made the shorts a bit anxious, causing them to borrow more shares to suppress the stock price."
(End of chapter)