Comment by Gingevere on 27/01/2021 at 21:00 UTC

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View submission: /r/wallstreetbets is making international news for counter-investing Wall Street firms that want to see GameStop's stock collapse. The palpable excitement is off the charts.

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How the fuck does that happen lol?

Very simplified version:

• A short is when you borrow someone's stock and sell it today, with the promise that in the future you will return it (plus interest) in the future. So anyone who shorts a stock 1) Has to buy it in the future. 2) Is betting that the future price will be lower.
• A bunch of hedge funds thought that the pandemic would kill GameStop. So they shorted it. HARD. The total quantity of shares shorted was 140+% of all shares of GameStop in existence. They all loudly announce they're shorting GameStop stock to generate bad PR for GameStop and drive the stock price down.
• GameStop releases their profit report, they actually did better than expected over the pandemic.
• A billionaire and the WSB community realize that the GameStop price won't be going down. These hedge funds won't be able to buy GameStop shares for less than they already sold them for, and those shorts gaining interest. The hedge funds are going to have to take a loss buying back those shares and they are going to take a bigger loss the longer it takes for them to do it. They're going to have to buy 140% of all the GameStop stock which exists. This creates MASSIVE demand for the stock.
• WSB buy up GameStop stock to create a massive shortage to meet this massive demand. This is called a "short squeeze". It has a name because hedge funds do this to each other and at-home investors all the time.
• The price of GameStop stock spikes. Hedge funds are desperately trying to buy GameStop stock to give back to the people they borrowed from before they accrue more interest or the price spikes even higher.
• Hedge funds lose billions and a few hedge have had to be bailed out by other private funds.
• Now funds are trying to lobby the government to do something like making discussion of short sales illegal on social media. Outlawing the exact fuckery they regularly employ to enrich themselves.

TLDR; Hedge funds try to fuck the market and in stead get fucked, now they're trying to make it illegal for them to lose money.

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There's nothing here!