A Group or Redditors Just Blew Up Two Hedge Funds Over GameStop.

[just444]

How an army of traders on the Reddit forum r/WallStreetBets helped drive a meteoric rise in GameStop’s stock price, forcing it to halt trading multiple times and causing a major headache for the short sellers betting against it: https://t.co/QNNo8s7GkZ
- Vox (@voxdotcom) January 26, 2021
so i don't really understand the whole thing, but the gist

Comments

[analievelyn]

I'm so confused but I'm happy that the ULTRA wealthy lost money??

Still so confused tho

[midnitepopcorn]

Say I purchased a camera for $100. I lend it to you. You sell it to another ontder for $100. The camera subsequently goes on sale for half price, so you pay me $50 to buy a new one. You pocket $50.

However, the camera has now sold out and the re-sell price has now gone up to $200. You now have to pay me $200, causing you to lose $100.

The Hedge Fund did this with 140% of the GME stock. Reddit discovered it. Everyone bought shares driving up the price. Hedge Fund now must pay the difference. Hedge Fund can't afford the difference. Hedge Fund gets bailed out. Stock went up higher, wiping out the bail out. If everyone holds, Hedge Fund will be forced to pay for the higher stock price.

[justrachna]

I have to say I appreciate you explaining this in this post. Your explanation is really accessible. Thank you ❤️

[midnitepopcorn]

ohmygoodness thank you <3 I was actually scared that I wasn't explaining things properly! Gotta make sure everyone gets the chance to punch up as well <3

[drop_and_roll]

One bit I don't get is how there's more than 100% of the stock.

[maryhurt]

I also wish someone would explain this tbh

c/p

[midnitepopcorn]

Late sorry <3

Should be illegal.

May not be the best explanation, but it's almost like playing hot potato. They borrow, then sell, then borrow the same stock again to sell. Once time comes around to pay the piper, they now have two people to answer to for one share.

If the stock goes down, they made double the profit. If not then they eat the cost. But they would do anything, including devaluing the stock at the cost of many, to avoid taking a loss.

Re: c/p

[maryhurt]

Damn, so glad people are starting to screw this system tbh

[midnitepopcorn]

Late sorry <3

Should be illegal.

May not be the best explanation, but it's almost like playing hot potato. They borrow, then sell, then borrow the same stock again to sell. Once time comes around to pay the piper, they now have two people to answer to for one share.

If the stock goes down, they made double the profit. If not then they eat the cost. But they would do anything, including devaluing the stock at the cost of many, to avoid taking a loss.

[drop_and_roll]

Thanks for explaining. It seems like there's a lot of unethical stuff going on in the finance world (even more than I was already aware of).