A Question on Game Stop

Remember the Game Stop stock anomaly? Maybe someone can explain how does one rectify the fact that the price kept going up, but the stores were still failing, right? So, what happens when the proverbial unstoppable force meets the immovable object? How are we to understand this paradox?

The stock price was going up because people wanted to buy the stock. Often, the reason someone wants to buy a stock is because the company is successful, but that’s not the only possible reason for wanting to buy a stock.

At some point, GameStop will go bankrupt or be acquired for cash, in which case, all stock will be forcibly converted to a final cash figure. The goal of everyone in the stock market is to estimate the likelihood of these scenarios and make net positive trades (taking into account dividends, stock buybacks and mergers) on the road to either of these two final outcomes.

Game Stop has taken pretty good advantage of the phenomena by selling a bunch more shares while their price was high, and by telling their reddit retail-trading fanboys that they’re going to invest in the future of gaming via NFTs and some kind of virtual game delivery hand-wavery.

There are plenty of companies that don’t make money and just burn their investors’ funds for as long as they have investors, so to the extent that retail traders remain committed to the Game Stop core beliefs, the music doesn’t really ever have to stop.

That’s like, the classic Homo economicus view, but if you read /r/WallStreetBets, it doesn’t really hold up as a universal trader ethos. There’s some combination of community-building, risk-taking, joking, and (mostly?) misguided attempts to screw over short sellers for moralistic reasons that seems to be more important for a lot of these guys.


Gamestop was a bunch of Reddit users realizing that some people had been stupid on the stock market. It was a “short squeeze”. Assorted Wall Street players had decided Gamestop was tanking, so they bought “short sells” which happened to be a good deal they thought. A short says “I will pay for the option to sell you stock at $X at the 3-month mark” or some such. The thought is, the stock will go down by then ( <$X) and they make a profit - buy later at current price when they have to deliver, which will be lower than the promised price. Someone ends up paying $X for stock that isn’t worth that much. (usually the loser will pay the difference rather than buying the stock).

Redditors saw the overcommitment on this - there were close to more shares promised to be sold than there were shares available. If everyone on Reddit who cared, bought shares, drove up the price, then when these shorts came due, the short sellers would have to buy at the overpriced new value. As short sellers panic and buy stock to limit their upcoming losses, the price goes even higher due to a shortage of stock.

Then the fan is fully soiled and the stock drops back to it’s appropriate level. with the warning that Wall Street people are idiots and should be wary of shot sells.

Then Robin Hood screwed the Reddit crew. Robin Hood was a cheap “anyone can trade stocks” web business. But in fact, they were a closed system, they were not actually a participant in the stock exchange like a for-real broker. They simply stopped accounts from trading (buying) Gamestop, and the whole mechanism collapsed. All the Redditors could do is sell their shares, so less competition, short sellers happier.

How did reddit know the details on the shorts? Is that public knowledge?

Lol, how much time you got?