GameStop Short Squeeze
A GameStop Short Squeeze is a short squeeze that occurred with GameStop stock with individual investorss going against Hedge Funds
- Context:
- It can (typically) be identified as a significant rise in the price of GameStop stock due to a rush to buy shares by those who had previously sold them short.
- It can (often) involve a large number of individual investors and Hedge Funds, with the former largely coordinating through the Internet Forum r/WallStreetBets on Reddit.
- It can have to significant financial consequences for short sellers and major Hedge Funds, resulting in substantial losses.
- It can be characterized by extreme volatility and high trading volumes.
- It can be associated with the controversial decisions by brokerages such as Robinhood, who restricted trading of the stock at the height of the squeeze.
- It can be associated in widespread media attention and scrutiny from regulatory bodies and lawmakers.
- It can be an example of how Social Media and online communities can influence the Financial Market.
- ...
- Example(s):
- GameStop Short Squeeze, 2021-01-28 when the stock reached over $500 per share in pre-market trading.
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- Counter-Example(s):
- A traditional Stock Market Rally driven by company performance or economic factors.
- A Long Position strategy in stock market investing.
- See: Stock, GameStop, Security (Finance), Hedge Fund, Short (Finance), Public Float, Subreddit, r/WallStreetBets, Internet Forum, Social News Website.
References
2024
- (Wikipedia, 2024) ⇒ https://en.wikipedia.org/wiki/GameStop_short_squeeze Retrieved:2024-2-3.
- In January 2021, a short squeeze of the stock of the American video game retailer GameStop and other securities took place, causing major financial consequences for certain hedge funds and large losses for short sellers. Approximately 140 percent of GameStop's public float had been sold short, and the rush to buy shares to cover those positions as the price rose caused it to rise even further. The short squeeze was initially and primarily triggered by users of the subreddit r/wallstreetbets, an Internet forum on the social news website Reddit, although a number of hedge funds also participated. At its height, on January 28, the short squeeze caused the retailer's stock price to reach a pre-market value of over US$500 per share ($125 split-adjusted), nearly 30 times the $17.25 valuation at the beginning of the month. The price of many other heavily shorted securities and cryptocurrencies also increased.
On January 28, some brokerages, particularly app-based brokerage services such as Robinhood, halted the buying of GameStop and other securities, citing the next day their inability to post sufficient collateral at clearing houses to execute their clients' orders. This decision attracted criticism and accusations of market manipulation from prominent politicians and businesspeople from across the political spectrum. Dozens of class action lawsuits have been filed against Robinhood in U.S. courts, and the U.S. House Committee on Financial Services held a congressional hearing on the incident.
The unusually high price and volatility continued after the peak in late January. On February 24, the GameStop stock price doubled within a 90-minute period, and then averaged in the neighborhood of $200 per share for another month. On March 24, the GameStop stock price fell 34 percent to $120.34 per share after earnings were released and the company announced plans for issuing a new secondary stock offering. On March 25, the stock recovered dramatically, rising by 53 percent.
- In January 2021, a short squeeze of the stock of the American video game retailer GameStop and other securities took place, causing major financial consequences for certain hedge funds and large losses for short sellers. Approximately 140 percent of GameStop's public float had been sold short, and the rush to buy shares to cover those positions as the price rose caused it to rise even further. The short squeeze was initially and primarily triggered by users of the subreddit r/wallstreetbets, an Internet forum on the social news website Reddit, although a number of hedge funds also participated. At its height, on January 28, the short squeeze caused the retailer's stock price to reach a pre-market value of over US$500 per share ($125 split-adjusted), nearly 30 times the $17.25 valuation at the beginning of the month. The price of many other heavily shorted securities and cryptocurrencies also increased.