Bahahaha! I’m fucking STOKED you asked. This is the kind of absurdity that I live for, cry over, and reinforces my belief that MONEY IS FAKE. Ok here goes…
First a definition: What does it mean to “short a stock”? Shorting or even short-selling stocks is when you borrow shares in a company then immediately re-sell them in the hopes that you can buy them back later at a lower price. You then return the shares to the original lender they were borrowed from and pocket the difference. It is a STUPIDLY RISKY way of making money on the stock market, and has traditionally only been used by Wall Street Evil Knievels and people so hopped up on cocaine they thought the housing collapse of 2008 would be a great fucking idea. None of you should try shorting stocks. Buy stocks, invest for the long term, and go about your business.
Mmkay, so with that out of the way, let’s talk about what’s going on with GameStop.
Hedge fund managers (people who run big conglomerations of investors and investments) are betting on GameStop to fail, business-wise. They think the stock is crashing and that the company is in trouble. Why? Not important for the purposes of this explanation. They have just made certain projections that show GameStop is failing on the investment front. So the hedge fund managers want to capitalize on this failure (read: get rich off of GameStop’s demise) by shorting GameStop stock. With me so far?
This is all business as usual for the world of high stakes investing. But heeeeeere’s where it gets interesting. There’s a Reddit forum called /r/WallStreetBets. Their whole thing is sharing stock tips and hot investments. It’s for people who know the stock market well enough to literally play with it on a small scale. They found out about the plan to short GameStop stock. And they took evasive maneuvers.
Suddenly, members of this Reddit started buying up GameStop stock en masse. These purchases drove the price of the stock way up (that’s how the stock market works) AND it prevented the stock shorters from fulfilling their scheme AND it forced them to lose a ton of money. For example, the professional hedge fund managers lost $1.6 billion in a single day last week. By contrast? One of the WallStreetBets dudes turned $50,000 into $11 million.
But what does any of this literally have to do with GameStop? ALMOST NOTHING. The company itself is not doing anything any different. Its value and stock prices are soaring not because of anything GameStop has done to improve itself… only because people who play with money are artificially inflating its value through this weird war.
In my opinion, the heroes here are WallStreetBets. They are demonstrating, in real time, how fucking arbitrary the value of something can be. They are calling Wall Street’s bluff and fucking with the people who–FOR A LIVING–just regularly decide to drive an individual company out of business and its employees out of jobs.
Whatever your thoughts on GameStop as a company, this is an abject lesson in how capitalism is not some hallowed law of the universe, but an arbitrary system we made up. That system can be hacked. It can be broken. And it can be fun!
Anyway, hope that helps. This is as close to a simple explanation as I could get, and a LOT of nuance is missing so please don’t @ me. If you want a way more in-depth read that’s still simple enough for those who don’t know shit about investing, I got my information from Vox. And if you enjoyed this explanation, maybe read these ones too:
A Brief History of the 2008 Crash and Recession: We Were All So Fucked
notapaladin 