Home Features What the hell is going on with GameStop stock? A brief explanation of the financial drama

What the hell is going on with GameStop stock? A brief explanation of the financial drama

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Gamestop wall street (2)

It has been a WILD week for the market, as the most unlikely battle of all time has played out in Wall Street. GameStop, whose presence on the stock market was the equivalent of being forced to invite your cousin to your birthday party, saw its stock price soar thanks to the activities of Reddit trading community r/wallstreetbets.

It has been an unprecedented move by the forum, earning it mainstream attention and highlighting just how broken the American financial system is, to the point where the US government is actively monitoring the situation. It also seems to be an imperceptible scenario to monitor, leading many to wonder: Just what the hell is going on? Here’s an insultingly brief breakdown on the entire brouhaha in which reddit investors fueled by the chance to make a quick buck and shitpost about their experience, have pissed off Wall Street investors who do the exact same thing but on an obscene level.

August 2020 – GameStop gets a new dad

Gamestop wall street (1)

Chewy founder Ryan Cohen rocks up on the Wall Street scene, takes a look at GameStop’s average stock price of around $10 and says “I’ll have some of that”. Cohen had plans for the company, big plans, and firmly believed he could turn the struggling brand around in an industry where digital distribution of video games was slowly gaining more ground every year.

Cohen’s rise towards becoming the GameStop’s largest private investor resulted in him noticing that the company’s stock was one of the most shorted around, which in a nutshell revolves around the idea that company stock is borrowed by investors when they think it’s going to decrease in value. That stock is then bought back at a lower price, with the difference being kept as profit. With Cohen in charge, much shorting was the order of the day.

Think of it this way: If I borrow a million shares and sell each one for $10, I make $10 million. The price of that share might be worth $5, so I pay $5 million back and pocket the rest. If the price of that share rises to $11, I’m out of pocket by a cool million because I owe the company $11 million. Simple, right?

What could possibly go wrong?

Something goes wrong

Enter Wallstreetbets. A trading and investing subreddit, ya boys on the forum had noticed for a while now that something was not right on Wall Street. After all, how could hedge fund bastards (great write-up here on why they’re a greedy waste of blood and oxygen on two legs) borrow more shares than were actually available?

Someone on the Reddit noticed that hedge fund investors had shorted 140% of all shares available from GameStop, and word began spreading around the gang. What if…what if they all banded together, to grab the hedge funds and put a short squeeze on them? Even if the shares borrowed didn’t exist, the overlords of American commerce had long since decreed that ALL borrowed stock had to be paid back. Hedge fund investors, full of greed, piss, and arrogance, thought that they were untouchable.

Wallstreetbets decided to teach them a lesson, resulting in one of the most glorious clapbacks of all time to the 1%.

The buying frenzy begins

Gamestop wall street (3)

Wallstreetbets members then started buying as much GameStop stock as they could get their hands on, which result in the value of those stocks being driven up. It’s worth pointing out that these were all just average people, earning average salaries, taking part in this. That feeding frenzy then had a knock-on effect, as the value of the stock soared to record levels, forcing the hedge fund investors to buy back their investment at a crazy price. According to estimates, investors who went for short stocks were slapped with a loss of $137.98 million.

Hedge funds had been dealt a huge blow, and the due date to pay back on the stock that they had borrowed was fast approaching. These investors, who had gamed a system for so long, had been taken completely unaware by Wallstreetbets, trapped like film director Kevin Smth’s portly ass in a storm drain while on the run from federal law enforcement.

Investors only had two options in front of them: Take the loss on the chin, or do something incredibly stupid. Naturally, only one of those options was chosen.

They did something incredibly stupid

Thinking that they were playing a game of chicken with Wallstreetbets, hedge fund investors doubled down and borrowed more stock, thinking that they could cause a crash in the stock price and save their greasy skins. Early results looked promising, but the bankers had no idea who they were dealing with as Wallstreetbets struck back with coordinated efforts to stay in the game.

No matter what dirty trick investors could pull from their filthy sleeves, Wallstreetbets had an answer. With mainstream media attention also beginning to increase in frequency, these hedge fund investors found themselves in an impossible situation as karma came back to bite them. Meanwhile, Wallstreetbets was reveling in the attention, which showed just how corrupt the entire American stock market really was.

“What I think is happening is that you guys are making such an impact that these fat cats are worried that they have to get up and put in work to earn a living,” a message by the subreddit’s moderators reads.

Big names began to get involved as well. Elon Musk, managed to send the share price into the stratosphere with a single tweet. Presumably with a smile on his face, considering how hedge funds in the past had attempted to kill Tesla with short squeezes. Other billionaires decided to join in on the fun, not caring if they made a loss as the entire effort boiled down to wanting to see hedge funds being burnt alive in their own hubris. Overall, it was good time had by all.

It just keeps going up

At the time of writing, GameStop’s stock currently sits at $193 per share, which isn’t too bad for anyone who bought in back when it was valued at $4 a pop. Hedge funds are still trying to short GameStop, and they’ve gone onto major news channels in an effort to shift blame while angrily yelling about being beaten at their own game. Wallstreetbets has succeeded at shining a light on the unrelenting greed of the financial system, although the end result has been a mix of a genuine push to overhaul the corruption inherent in Wall Street and well-connected businessmen stepping in to save their saggy skins.

On January 28, stock-trading app Robin Hood halted trade on companies such as GameStop and AMC. This was done “in light of recent volatality,” according to Robinhood, but other platforms such as Webull, M1 and Public removed those restrictions a few hours later restrictions that afternoon. The entire brouhaha is far from over, with some analysts predicting that GameStop’s stock could be worth thousands before it dips once again.

US congressperson and occasional Among Us streamer Alexandria Ocasio-Cortez has thrown her hat into the ring, saying that she would support a hearing to look into the whole sordid affair. ACO criticized the recent “decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit.”

When will it end?

Who knows? A paradigm shift is unfolding right now on Wall Street, and the tears from bitter hedge funds are delicious. Comeuppance has long been overdue, sales of incredibly tiny violins are up, and when the dust has settled you can expect hedge funds to have lost a billions in dollars in the process. If you’re interested in reading more on amazing financial spectacle, check out this brilliant timeline.

Last Updated: January 29, 2021

24 Comments

  1. Apparently Robin Hood(clearly on behest of their hedge fund masters) has in utter desperation started to short sell investors’ stock without their permission/request. Someone is going to jail!!! https://media2.giphy.com/media/VlAYOigFtnonm/giphy.gif

    Reply

    • HvR

      January 29, 2021 at 03:50

      Apparently it is Citadel Investments behind the move (they are here in South Africa if anybody might want to consider shifting their investment managers).

      The inside rumour is they bailed out Melvin Capital for the $3billion, SHORTED AGAIN, then immediately pressured Robin Hood who do a lot of their trades through Citadel to block the stocks being shorted.

      That is along list of market protection regulations being broken, hope this finally results in these scum finally doing some jail time.

      Reply

    • MechMachine

      January 29, 2021 at 10:42

      Hey Pieter. Happy New Year buddy. How’s the Series X. I hope it’s all you expected. I was actually thinking about you ( or rather your comments ) the other day.

      Reply

  2. HvR

    January 29, 2021 at 03:44

    One very impressive thing about these hedge fun assholes, their level of assholry had reached such a level that AOC, Ted Cruz and Donald Trump Jr. AGREED WITH EACH OTHER on the level of assholery reached

    Reply

    • cloudzn

      January 29, 2021 at 04:11

      If you can get dems and reps to agree then you know you are in shit, honestly it’s been a long time coming these wall street scum have been getting away with it for too long now

      Reply

  3. Gavin Mannion

    January 29, 2021 at 04:29

    I think it’s likely too late now but I plan on putting some money into this just so I can tell my grandkids I was part of the wave that broke the hedge funds back

    Reply

    • cloudzn

      January 29, 2021 at 05:40

      Do it while you can because there’s probably law coming to protect the hedgefunds soon

      Reply

      • Gavin Mannion

        January 29, 2021 at 05:42

        I’ll be surprised if they do because people will lose their shit. I am watching it with interest though as I’m a firm believer in the fact that hyper capitalism is worse for humanity than socialism or communism

        Reply

        • cloudzn

          January 29, 2021 at 06:53

          Well a certain US politician is married to a very wealthy investor and hedgefunds and financial people are the ones calling for regulation law anything is possible but like you said people would lose their shit if any laws were introduced. I’m glad that people are finally waking up, no one really cares about the working class not the politicians nor the elites and it’s time everyone took a stand

          Reply

    • Gr8_Balls_o_Fire

      January 29, 2021 at 06:42

      Usually, if it hits the mainstream news, it’s too late. But this situation is new, so you never know.

      Reply

  4. Kapitan Balalaika

    January 29, 2021 at 06:21

    Still whole thing puts a smile on my face. Lambo soon?

    Reply

  5. Gr8_Balls_o_Fire

    January 29, 2021 at 06:41

    I love how those that don’t understand the market, immediately label those that work in the market as “greedy” and “corrupt”.

    The game is open to anyone to learn. More traders = more opportunities.

    Get out of your asses and learn to work.

    Reply

    • Gavin Mannion

      January 29, 2021 at 07:03

      out of your…. well now that’s a visual I didn’t need in my life

      Reply

      • Gr8_Balls_o_Fire

        January 30, 2021 at 01:49

        lol sorry brother XD happy new year

        Reply

    • cloudzn

      January 29, 2021 at 07:14

      Clearly you missed the part were trading apps was stopping buying shares but selling was ok and then shares was being sold without permission, yes the game is open for anyone to learn but the odds are heavily stacked against anyone new

      Reply

      • Gr8_Balls_o_Fire

        January 30, 2021 at 01:48

        I hear you.

        On your last point I must say, retail traders have a huge advantage over hedge fund companies. The ability to bide their time finding opportunities in the market. The funds have no choice BUT to trade every day as that is their mandate.

        Granted, this is not a guaranteed win strategy, but savvy traders take advantage of the freedom to not trade.

        Reply

        • cloudzn

          February 1, 2021 at 10:16

          i would like to remind you that they were responsible for the 2008 economic collapse and it’s alleged that a hedgefund instructed robinhood to stop allowing people from buying gme stocks which is technically illegal. This hedgefunds do not deserve any kind of sympathy

          Reply

          • Gr8_Balls_o_Fire

            February 4, 2021 at 02:55

            If I remember correctly, and I can be mistaken, the source of the 2008 crisis was reckless lending practices from banks, and it goes a bit deeper than that.

            Hedge funds are highly regulated entities, one wrong move can end a man’s career forever. They are an *essential* cog in the global economy. Society would be much worse off without them.

          • cloudzn

            February 4, 2021 at 03:14

            Here’s an interesting article explaining the hedgefunds role in the economic collapse and they aren’t regulated as you want to believe

            https://www.thebalance.com/how-hedge-funds-created-the-financial-crisis-3306079

          • Gr8_Balls_o_Fire

            February 4, 2021 at 02:57

            As for them disallowing buying of GME, that is very suspect and no proof has been given yet right? If anything, the regulators (SEC) should disallow ANY new trades on that stock, as it is a blatant case of “pump and dump”.

          • cloudzn

            February 4, 2021 at 03:10

            So while investors and hedgefunds have been doing pump and dump and shorting for the moment the average man does it then it needs to get regulated? And for the citadel link to robinhood it’s going to get exposed pretty soon with the amount of scrutiny robinhood is under at the moment

        • cloudzn

          February 1, 2021 at 10:16

          i would like to remind you that they were responsible for the 2008 economic collapse and it’s alleged that a hedgefund instructed robinhood to stop allowing people from buying gme stocks which is technically illegal. This hedgefunds do not deserve any kind of sympathy

          Reply

  6. MechMachine

    January 29, 2021 at 10:40

    I wonder when the movie is coming.

    Reply

  7. Mandalorian Jim

    January 30, 2021 at 07:32

    And now there are calls for regulations, because how dare the dirty peasants leave billionaires red-faced.

    Reply

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