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

[trekkiepetrelli]

eat the rich!

[analievelyn]

Always. Forever.

[mmmfashnik]

Basically Melvin Capital was shorting a whole bunch of GameStop shares. That's basically when they borrow shares that they think will drop, sell them at their current price andthen buy them back at their new lower price. They return the shares back to the lender and pocket the profit.

Wallstreetbets banded together to buy shares, driving up the price. So now Melvin Capital have to buy back the shares at a much higher price.

WSB is also trying to do the same with AMC and BlackBerry stocks.

[la_geni]

This is a really good explanation. Thanks!

[mwffj]

This is exactly why they're doing it. No one on r/wsb has any love for Gamestop, they're not trying to save it or anything like that.

[formisscaulker]

what does it mean what does it all mean

[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.

[chexlemeneux]

How can someone lend someone a stock tho? Like they’re aware that the person who’s borrowing it is going to sell it? What’s the benefit to them for lending?
Sorry for all the questions!! This is so confusing to me

Edit: read your comments above and I get it now!

[pseudonygma]

Ahh... I get it now. It's because the Hedge Fund still has to return/replace the stocks to the original owners/clients that they "borrowed"/stole from.

Just to clarify, in your camera example, "the camera has now sold out and the re-sell price has now gone up to $200" --> this means that the 2nd hand market for the same camera is $250; I still need to pay you $200 (since I already gave you $50) for you to buy back the same camera, right?

I'm sorry if this is a dumb question, finance is not my strong suit. :(

[januarysix]

Short selling should be illegal

[browneyedguuurl]

They are currently pressed and freaking out plus The WH sent a press release that they are monitoring it so stand by. But releasing the $2k checks they promised is a problem.

[toxic_illusion]

AMC is next I’ve heard so if anyone wants to get in on the action.

[analievelyn]

The TV station?

[toxic_illusion]

The movie theater chain :)

[megalixer]

lollll not reddit saving the movie theater industry, christopher nolan WHO