Much ado about Gamestop

Here are the key points.

1.#WallStreetBets rallied the troops (initially based on sound intel)

A Reddit group called #WallStreetBets had been obsessed with Gamestop for several months, feeling the company was unfairly undervalued. There were plenty of good reasons for this sentiment and so the velocity of their trades increased slowly at first, but the hype train started to reach streaking velocity when it was revealed that several hedge funds had taken massive short positions against the stock.

Their plan was simple - if a rally was coordinated, then hedge funds like Melvin Capital would be forced to buy shares at a higher price in order to exit their short positions. And by buying, they’d be further inflating the price for anyone still holding short positions. This cycle is called a short squeeze.

2. Melvin made losses

The rally was successful - Gamestop stock soared 400pc, pushing hedge fund Melvin Capital into losses of over $4.5bn. Total losses are in the region of $20billion.

3. The normies doubled down.

A small tribe of everyday joes became a global movement of over TWO MILLION lay investors.