Gamblers vs. giants

Due to the downturn in the offline game sales industry and COVID-19, GME’s business was dismal last year and its share price was sluggish. On the 11th of this month, Cohen, founder of online pet food giant chewy, joined the board of GME. Retail investors’ confidence was greatly increased, and the share price rose 50%.

However, this wave of rise attracted many short selling institutions such as citron research and hedge funds to start a large number of short selling GME and ignite the anger of retail investors.

Two weeks ago, the “Wall Street gamblers” section of reddit began to mobilize, calling on all its friends to “take short positions” and buy GME. On the 14th, the share price was close to $40, and was relatively stable in the following week.

On the 19th, citron research mocked retail investors for not understanding the rules of the game, and asserted that the stock price would soon fall back to $20, which was the level before Cohen’s joining brought about the rise.

Retail investors bought GME crazily. On the 25th, its share price soared to nearly $77, and on the 27th, its closing price reached $344.99, up 1800% so far this month and 8000% in the past 12 months.

As of the 26th, the losses of institutions shorting GME had exceeded $5 billion. Melvin capital, a hedge fund that participated in short selling, hastily closed its position. It lost 30% of its capital this month and had to turn to point72 hedge fund for help. Point72 itself also lost 15%.

Source: Bloomberg, Wall Street Journal

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