GME short squeeze

Understanding The GameStop Short Squeeze

What happens when memes, regular people, and Redditors all join in for a battle for Wall Street against the old school hedge fund mainstays? A very interesting run up of stocks that nobody saw coming, that’s what.  

The global pandemic brought about some unprecedented changes to retail shopping. One retail chain that was in this phenomenon was a popular video game seller by the name of GameStop, which trades on the New York Stock Exchange under the GME ticker.  

Many hedge funds were betting against its performance, thus shorting the stock.  Smaller non-institutional investors started buying against this short otherwise known as a short squeeze to call the larger institutions position on the stock short. It was made especially popular by the subreddit, WallStreetBets. This ended up making the price of the stock soar through the roof. How much, you may wonder? At the peak, over 1,250% over the start of the year’s stock price.

As a result, large hedge funds had extremely large losses to show as a result. Melvin Capital lost $6.6 billion in January out of $12.5 billion. Citadel and other funds have lent the fund $2.75 billion.

What will happen next? Read on for a visual representation of the GameStop saga.

Source: Expensivity