The GameStop Saga

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Stocks and cryptocurrencies are now memes for many on the Internet. Of course, Robinhood, Reddit, TikTok, and Twitter are mostly responsible. You’re all familiar with these memes… GameStop, Doge, AMC, Hertz, and the list goes on. Ask an institutional investor if any of these companies are a wise investment and their heads will spin. Ask the average Robinhood, Reddit, or Twitter user and you’ll get a totally different answer. It used to be that the retail investor would get crushed by the large investors. This is no longer a guaranteed outcome.

There is a deeply entrenched belief, true or not, that hedge funds and banks constantly generate profit at the expense of the people. The 2008 housing crisis, hedge fund failures, government money printing, government lockdowns… the belief is that the response to these events benefits big banks, rich executives and entrenched politicians at the expense of the people. People are tired of it. Many people also have extra free time right now if they aren’t working in an office due to the pandemic. Social media trading has become a common pastime amongst this “enlightened” crowd.


This week a group of Reddit users conspired to “stick it to the man” and drive the price of GameStop up and “through the roof” as they say. Hedge funds that had significant short positions in the stock (a bet that the price will fall) would suffer big losses. As a physical retailer of games during a pandemic where downloading games is trivially easy, it’s easy to see why hedge funds might not be too bullish on GameStop. Irrelevant. GameStop is now a $30B company and will likely raise a huge “at the market” offering to put a LOT of cash in their bank account in the coming hours (if they’re smart.) At that point, GameStop can transition into any new business that it chooses and close all of its stores. A nice outcome for GameStop bad outcome for hedge funds shorting GameStop. Legal or illegal?


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