This week we’re talking about the small stock investors of Reddit who made short sellers on Wall Street lose big!
Just a couple weeks ago, GameStop (GME) was priced at $39.12 / stock and today it’s reaching highs of $325. So how did we get here?
STOCKS EXPLAINED:
When an investor shorts a stock, they think the company will lose money in the future and they bet against them. When an investor goes long on a stock or company they think they will gain money and they bet ON them. Now it seems like everyone can get in on this gamble but that’s not as true as it seems. Yes everyone can play but the real movers are the large investors… like billionaire large.
They’re the real winners because when they invest, they literally have the power to move markets and change the direction of stocks. This is because they’re buying power is so large compared to any small investor.
What happened?
In an SEC filing, was revealed that Melvin Capital, founded by Gabriel Plotkin, had a large short position in GameStop. After this was released Melvin Capital became a target for Reddit users in subreddit r/wallstreetbets. Basically, they all banned together and bought more GME stocks hoping to make these short-sellers lose… and it worked. So well that Melvin Capital and Citron Research the initial targets have already taken their loss and closed their position.
The small players were finally clever enough to win the game. And I think they had the big investors shook. This is unprecedented and goes to show how powerful small investors can really be. After seeing how much billionaires have made and how much the rest of the population has lost over the pandemic alone, people are tired.
The stock is still doing great for now but we don’t know what this means for the future of the stock. Regardless of what happens, it’s good to see the power small investors can have!
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