GameStop, before the frenzy, was one of the most shorted shares on the US market, as a range of funds bet that it would slump during the pandemic.Ī short squeeze happens when a stock price that was expected to fall, instead rises. What is a short squeeze?Įssentially, on the stock market, you can bet on a share price falling rather than rising, by “borrowing” shares and selling them at the current price, with the obligation to buy them at a later date, at whatever price they have then reached. It has evolved its own language and in-jokes, with users openly talking about making dumb decisions and the subsequent coin-toss of losses and gains.īut over the past six months, accelerating in the past few weeks, its users have zeroed in one one main stock – GameStop – and a tactic involving the “short squeeze”. R/Wallstreetbets is marked out by a devil-may-care approach to shares – its users are keen to gamble big and disdainful of traditional traders. It’s been around for years – offering a highly variable level of return to its members. Reddit forums trade tips on anything from bodybuilding to relationships and finances, but this one is about risky stock market investments. So, the main character of this tale is a subreddit called r/Wallstreetbets. How we got here is a complex tale – involving class warfare, the mechanics of meme culture and a phenomenon known as a “short squeeze”.Įssentially, retail investors have found a way to use their collective buying power to exploit a weakness in short selling, and both make money and a point in the process. This has nearly bankrupted a few hedge funds, to the delight of smaller investors, mostly organised and egged on by the online forum Reddit. Or, more impressively, a rise of 10,692% compared to its price of $3.25 in April 2020. You may have noticed that the stock price of GameStop, a struggling US computer games retail company, has soared from US$96.80 to $347.50 in the past three days – a rise of 359%.
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