If you’ve been following the news, you are probably aware that there are a few stocks right now– most notably GameStop (GME), that have soared to incredible heights in a matter of days, thanks to a zealous group of individual investors on reddit and TikTok.
These aren’t titans of finance; they’re a bunch of little guys, many of whom are also frustrated by the rigged financial system.
A bit of background– GameStop is a company that sells video games. And, for years, almost all of their sales have been from their 5500+ stores around the world.
That business model worked really well… in 2005.
Today, most users download video games online directly from the publishers, or they stream games from Google, Amazon, Apple, or Steam. Going into a store and buying a DVD is a thing of the past, and GameStop’s sales have suffered as a result of this trend.
A handful of hedge funds have been betting that GameStop will go out of business soon, or at least that the stock price will continue to decline.
So these funds shorted the stock in a huge (and dubious) way, selling more shares of the company than were actually in existence.
And a number of small investors saw these questionable short positions and said, ‘Enough is enough. We’re tired of hedge funds exploiting the market.’ So they’ve banded together and bid up the price of GameStop’s stock to absolutely epic levels.
