Members of Reddit Forum Send Gamestop Stock Soaring


Courtesy of The Verge

Adam Mateja, Staff Writer

Members of the r/WallStreetBets Reddit forum pushed the price of GameStop stock through the roof, which plummeted the financial stability of many large hedge funds which betted against the stock from doing well—giving hedge funds, such as Melvin Capital, losses totaling in the billions of dollars—nicknaming the move “The Short Squeeze.”

A “Short” in stocks is when a trader bets that a stock will go down in price. They borrow stock and immediately sell it. If the stock price does go down, they’re able to buy the shares they borrowed for cheaper than they sold the borrowed shares for. They pay back the lender and keep the difference. If they’re wrong, and the stock goes up, they have to buy stock to cover the loan at a higher price and lose money.

The “Squeeze” part is when a stock that many people are shorting starts to move up, and when some of the traders get nervous, they start buying to cover. The higher it goes, the more anxious they get, the more they feel like they have to cover (pay back the lender) before it runs up some more. Shorts in a squeeze grab the stock, driving the price up and compounding the problem.

Members of the r/WallStreetBets forum noticed an insane amount of traders betting against the company, shorting stocks that they hadn’t even borrowed yet. Members of the forum decided to buy GameStop (GME) stock so that large traders and hedge funds would have to cover their bets, which would further increase the price, making other traders have to cover, creating an endless loop of the GME stock price going up and to the moon.

Even though GameStop’s share price at its highest was $483, the stock dropped to $63.77. On February 5th, more than an 80% drop. The plunge had taken more than 30 billion dollars off the company’s market value. Those who sold early potentially made a profit; however, those who were late and unlucky lost thousands.

To learn more about GameStop and the rise and downfall of its stock, visit