Melvin Capital, a very prominent and wealthy hedge fund, "shorted" GameStop, because they thought it was a "dead man walking" business.
Shorting: When you "borrow" shares from a market broker, and immediately sell the borrowed shares. You still "owe" those shares to the broker and must pay the broker back (in shares). The value of the shares you borrowed can change. If you pay back the broke when the shares are a lower price, you make money.
Melvin Capital probably borrowed ("shorted") those shares at around $5-$10, and were hoping to advertise the massive short as a way to crash GameStop. Instead, r/WallStreetBets noticed the massive short and decided to invest heavily to fuck Melvin Capital over. Now instead of the share price going down, the share price went up, so Melvin Capital owes WAY MORE money on the borrowed shares than if the share price had gone down. In fact, there's no limit on how much money Melvin Capital can owe the broker.
This is called a "Short Squeeze". When "bullish" ("confident") investors decide to invest AGAINST a short and force the shorters to return their shares early, or bleed money.
r/WallStreetBets drove the price up to as high as $500. That means Melvin Capital had to return $500 per share on shares that they only made like $10 on, meaning they lose ~$490 per share (if the price stayed there). This would not only bankrupt them, but create a massive vacuum of debt in the market that would probably crash it, or cause a government bailout.
Either would be a win, as far as those who suffered the pain of 2008 are concerned. The media and government are now salty because the average person isn't supposed to engage in collective action like hedge funds do every day.
In the simplest way possible:
Melvin Capital, a very prominent and wealthy hedge fund, "shorted" GameStop, because they thought it was a "dead man walking" business.
Shorting: When you "borrow" shares from a market broker, and immediately sell the borrowed shares. You still "owe" those shares to the broker and must pay the broker back (in shares). The value of the shares you borrowed can change. If you pay back the broke when the shares are a lower price, you make money.
Melvin Capital probably borrowed ("shorted") those shares at around $5-$10, and were hoping to advertise the massive short as a way to crash GameStop. Instead, r/WallStreetBets noticed the massive short and decided to invest heavily to fuck Melvin Capital over. Now instead of the share price going down, the share price went up, so Melvin Capital owes WAY MORE money on the borrowed shares than if the share price had gone down. In fact, there's no limit on how much money Melvin Capital can owe the broker.
This is called a "Short Squeeze". When "bullish" ("confident") investors decide to invest AGAINST a short and force the shorters to return their shares early, or bleed money.
r/WallStreetBets drove the price up to as high as $500. That means Melvin Capital had to return $500 per share on shares that they only made like $10 on, meaning they lose ~$490 per share (if the price stayed there). This would not only bankrupt them, but create a massive vacuum of debt in the market that would probably crash it, or cause a government bailout.
Either would be a win, as far as those who suffered the pain of 2008 are concerned. The media and government are now salty because the average person isn't supposed to engage in collective action like hedge funds do every day.