Who would have thought a bunch of individuals on an Internet group could take on the hedge funds at their own game and win. There’s a movie in this one. Unlike the big short I suspect the outcome here will be less simple for the system to control.
The concept is beautiful. Select a company that’s been highly shorted by a big hedge fund (that’s where they borrow shares they don’t own, sell them in the hope the price will fall soon and they will make a profit, then wait for the price to drop to buy back at an agreed time (where they HAVE to buy the stock and give it back to the original owner)…. Well the group of individuals agreed to focus on GME an American bricks and morter game selling shop that was not doing so well on the stock market and was heavily shorted. They managed to push the price up by a huge multiple, hence forcing the hedge funds to buy back stock at the inflated price and lose billions.
I’ve never agreed with shorting. It’s a vulture tactic that greedy trader use to effectively make a quick buck. Hopefully what has happened this week with GME will put an end to the practice.
As always there will be losers on both sides of this particular battle but hopefully overall some good will come from it.