P.S. I've given up going to the Saturday races but here is something to dream about while we wait for the Quarterly report.
Squeezing the shorters. GameStop Controversy Explained
US games retailer GameStop was at the heart of a major short selling controversy in 2021—now immortalised in a Hollywood movie called Dumb Money.
Essentially, a number of large firms and hedge funds that had shorted the company’s stock were caught in a ‘short squeeze’, fuelled by everyday investors banding together—driven by a Reddit community—to buy and hold GameStop shares.
GameStop’s market value surged to unprecedented highs, which led to huge losses for some institutional investors and gains for some individuals.
What’s a short squeeze?
Shorting relies on selling borrowed stocks. The requirement to buy back the stock at some point—to return borrowed assets—means you can theoretically lose more than you invest (to an unlimited amount) when shorting, if you’re wrong about the price falling.
If the price of a stock rises suddenly and keeps rising, it can also be difficult to find investors willing to sell the stock in order to repurchase enough to close out your position.
Lots of short sellers trying to buy a stock all at once (to minimise their losses) can also push the share price even higher and deepen short sellers’ losses—this is what’s known as a short squeeze.
Loading up the buy side early could be a good bet.
The sell side has been progressively handicapped with short positions since the 17th of June. As they get loaded back into the buy side HGO will run faster and faster like a champion who is given performance enhancing drugs instead of a handicap.
HGO Price at posting:
6.2¢ Sentiment: None Disclosure: Held
