Ross: The little guy wins as Reddit topples hedge funds with GameStop stocks
Jan 28, 2021, 7:05 AM | Updated: 10:23 am
(Getty Images)
It was another social media attack against the elites – but this time it was on Wall Street. A company called GameStop, which once made huge profits buying and selling computer games, was tanking.
So, the sharks moved in – hedge fund managers shorted the stock, betting it would plummet. They would borrow GameStop shares for a fee, sell those borrowed shares, wait for the stock to drop, then buy those cheaper shares to pay back the broker. Easy money.
Except a social media campaign on Reddit got thousands of small investors to join a massive GameStop buy-in, and place so many orders that a share of GameStop worth $18 on Jan. 1 was worth $450 as of early Thursday morning.
Suddenly, the short sellers facing the due date on their stock loans realized they’d better buy in before the price went higher, thereby helping to push the price higher yet. Confusing, I know!
Bottom line – the hedge fund managers got owned by the masses.
For now.
Because to bank their winnings the masses have to sell, and once you’ve tasted the easy money there’s always the temptation to keep going.
But for now, we have seen that without rioting or looting, the little guy was able to stick it to the man where it really hurts: with a swift kick in the assets.
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