A bunch of people stuck at home went down the list of stocks looking at them and found that gamestop's stock was shorted 130%(as in more shares than that exist) and spread it to reddit, where more studied it and found that investors were purposely screwing with the stock to make money on shorting it, and then decided to screw those investors.
Shorting is where you borrow someone else's shares and sell them immediately, then buy them back at a low price later to return to them. When you do this and then the stock rises, the brokerage companies(etc) will start pushing for you to return their shares unless you can convince them to wait longer. So when the price started going up, they wanted their shares back, the investors/companies/shorters didn't have the money to do that, needed a bail out, then proceeded to SHORT IT AGAIN.
Hedge funds shorted the stock which means they borrowed stock from a brokerage then sold it at the market value. The hedge fund pays the brokerage interest on what amounts to a loan of stock, but eventually is required to return the stock. This means that they lose money if the stock goes up and make money if the stock goes below what they sold at. People are keeping GME expensive as fuck because they know that the hedge funds will need to buy it to return it to the brokerage at some point regardless of the market price of said stock. They could be looking at billions in losses because of this and if they are unable to make good it could cause a serious market failure.
Anyone able to EL5 what’s happening?
A bunch of people stuck at home went down the list of stocks looking at them and found that gamestop's stock was shorted 130%(as in more shares than that exist) and spread it to reddit, where more studied it and found that investors were purposely screwing with the stock to make money on shorting it, and then decided to screw those investors.
Shorting is where you borrow someone else's shares and sell them immediately, then buy them back at a low price later to return to them. When you do this and then the stock rises, the brokerage companies(etc) will start pushing for you to return their shares unless you can convince them to wait longer. So when the price started going up, they wanted their shares back, the investors/companies/shorters didn't have the money to do that, needed a bail out, then proceeded to SHORT IT AGAIN.
I think that's how it goes.
Hedge funds shorted the stock which means they borrowed stock from a brokerage then sold it at the market value. The hedge fund pays the brokerage interest on what amounts to a loan of stock, but eventually is required to return the stock. This means that they lose money if the stock goes up and make money if the stock goes below what they sold at. People are keeping GME expensive as fuck because they know that the hedge funds will need to buy it to return it to the brokerage at some point regardless of the market price of said stock. They could be looking at billions in losses because of this and if they are unable to make good it could cause a serious market failure.