For last a few days stock market gone crazy. The reason is shorting GameStop by major hedge funds. The hedge funds used the same strategy for decades but this time small retail investors overplayed hedge funds in their own game. Here’s how.
Hedge funds get together and sell shares (hedge funds borrow shares to sell and buy it when price lower, difference = profit) of particular company with intend of crashing that stock price. This strategy worked and was a base of unbelievable returns to hedge fund investors.
GameStop company did not perform well because now everything shifts to digital. Rational hedge fund investors decided to earn huge profits. But they didn’t expect that investors on the WallStreetBets subreddit forum will get together and beat big players. Key financial details below
GameStop 52 weeks range $2.57-$483, market capitalisation $22.7B. But the most interesting part is number of outstandingly shares (69.75M), public float (51.03M) and short interest (61.78M). This numbers mean that more shares sold than actually available in free float. That’s why risk disclaimer always available in trading sign up documents. It’s risky and volatile.
A few big hedge funds lost around $5B and it’s not yet over because short interest is greater than number of free float shares.
This is one of the most exciting news that I read about stock market in last a few years. As a former forex trader I can’t wait to check GameStop stock tomorrow.
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