These past few days have been nothing short of chaotic for the stock market. Thanks to the efforts of the internet, specifically Reddit, major hedge funds have lost billions to up and coming investors. And of all companies, GameStop is the one at the center of one of the greatest upsets in stock trading history.
To understand what’s going on, it’s first important to understand what the act of shorting a stock is. To explain briefly, when investors short a stock, they are essentially betting against a company doing well. A broker loans a stock to an investor, and the investor hopes to make more money off of selling the stock than they owe to the broker, turning a profit. The ethics of this practice have been questioned by many, as it can often serve to beat already struggling businesses even further into the ground, and is quite clear that r/WallStreetBets did not take kindly to this practice.
r/WallStreetBets is a subreddit which focuses on investing in the stock market. As of the writing of this article, it has a staggering 8.3 million members. When the subreddit caught wind of hedge funds, which are investment companies, shorting against GameStop, they decided to take a stand. Seemingly overnight, WallStreetBets was able to get GameStop’s stocks, along with several other companies such as AMC’s, to skyrocket in an unprecedented manner, costing the hedge funds billions and forcing them to be bailed out.
Interestingly enough, it seems that many on r/WallStreetBets are not in it for the money, but rather, to make a point. Quite a number of users are rallying others to hold their stock rather than sell it, in order to keep the value of the stock high. This seems to not only be in retaliation to the hedge funds shorting against businesses such as GameStop, but against investing sites that have restricted users from investing in more stocks in these companies.
As of now, despite many fluctuations in the value of these stocks, it seems that these ambitious investors are standing their ground, and the battle continues. It is possible that this sudden movement could give GameStop the financial push they need to get back onto their feet, however, only time can tell how this will play out.