Surprising what happened on Reddit and Wall Street in the last hours. Thousands of users of this well-known internet portal have made a joint purchase of shares to manipulate the market , thus managing to move it at will and sowing chaos for Wall Street investors, many of them positioned short for these shares.
To understand what caused this debacle we must first familiarize ourselves with the concept of short selling . Short selling is a fairly common stock market operation where you can buy shares in a company and, after a while, you have to return those shares to the seller.
If the company has a dark future and you think it will end in bankruptcy, this open short position can pay off big. But, the risks are very high and if the opposite happens we can lose 100% of our account.
Well, there were a large number of investors at GameStop who were short . This company, based on the obsolete model of selling video games in stores, was on the verge of bankruptcy and these investors had bet on it. In fact, it was the company with the most open shorts on the stock market.
From the / r / WallStreetBets subreddit, with more than 2.3 million users, a share purchase announcement began to be launched . This announcement was followed by many users, thousands, who started buying GameStop shares in trading apps like Robinhood.
GameStop went from being worth $ 2.5 per share to almost $ 150 in less than a trading day, something never seen before. The losses caused to investors positioned short have been millionaires, many of them grouped in investment funds that may have to disappear after this action.
What is behind this measure? The vindictive action of Reddit users for this type of purchases that seek the end of a company.