OK, but why GameStop?
You can put some of the blame on Reddit’s Wall Street Bets forum, one of the weirder places on the internet. Wall Street Bets, or WSB, is where armchair traders gather to share memes, commiserate over losses and share more memes. But they also trade tips and analysis that can go on for pages.
GameStop’s shares started to rise in December, after the founder of the pet-supply site Chewy.com bought a stake in the company and got a spot on its board. Slowly, the company gained the attention of WSB and traders who frequent the gamer-friendly social media service Discord.
The traders’ motivations vary widely. Some reason that GameStop’s shares are a good value. Others are just riding the wave. And others want to squeeze Melvin Capital, a hedge fund that was shorting GameStop. They’re the ones quoting Heath Ledger’s Joker character from “The Dark Knight Rises”: “It’s not about the money, it’s about sending a message.”
But the aggressive maneuvers against the shorts aren’t necessarily limited to the amateurs. Wall Street’s big players know a good opportunity when they see it.
How does the GameStop squeeze end?
A spokesman for Melvin Capital — which needed a $2.75 billion cash injection on Monday because of the squeeze — said the firm had closed out of its short position. Andrew Left of Citron Research, another short, said he had covered the majority of his short position “at a loss, 100 percent.”
There’s a catch: GameStop, as a company, is not noticeably different from a month ago. By any conventional measure, its share price wildly inflated — and extremely risky for whoever owns its shares.
But this isn’t just about GameStop anymore. Enthusiastic amateurs are also bidding up the prices of other struggling stocks, like the movie theater chain AMC and the smartphone maker BlackBerry.
This content was originally published here.