A Funny Thing Happened in the Forum
In case you missed the biggest market story of the new year, here’s the short version: a group of rogue retail investors got together on Reddit (a popular online forum) and decided to stick it to the man by aggressively purchasing shares of GameStop and other out-of-favor stock names. “The man,” in this case, was a combination of hedge funds and short sellers who had bet on these stocks declining in value by borrowing shares at the then-current price with the intent to purchase them at a lower price and make a profit when they covered their position. Thus, when the Reddit rocketeers started buying, the result was a “short squeeze,” which forced the short sellers to purchase shares at a higher price to cover their bets, which in turn drove the price even higher and resulted in A) devastating losses for the short sellers, and B) stratospheric gains for the buyers...