The hottest topic on Wall Street right now is GameStop short selling, and how traders from a popular subreddit sent its shares parabolic.
Reddit bills itself as the front page of the internet, a network of communities based on people’s interests. Just about anything that anyone on the planet is interested in, there’s probably a subreddit where you can discuss it with others.
Subreddit r/wallstreetbets has 2.2 million “degenerates” — members — and bills itself as “Like 4chan found a Bloomberg Terminal.” And let’s just say much of the content there is NSFW (not safe for work).
The degenerates over at r/wallstreetbets have targeted heavily shorted shares of GameStop Corp. (NYSE: GME) to make short sellers like Citron pay… And pay dearly they have.
According to S3 Partners via CNBC, short sellers are down about $91 billion for the month of January. For comparison’s sake, short sellers lost $243 billion for all of 2020, a 20% loss.
So today, I’m going to break down the GameStop short selling craze and explain exactly how it happened.
First, let me say GameStop is a pig stock. I call it GameJunk. The reason being is it’s a dying business model — it’s Blockbuster, it’s Sam Goody. Every game I’ve bought recently was a digital download, meaning no game disc required. And GameStop sells… games on disc, new and used.
Some consoles nowadays are already shipping without disc drives. Eventually, there will be no discs at all. But GameStop short selling has helped send shares of this dying company parabolic… to the moon!
On Jan. 12, GME was trading around $20. It doubled to $40 a share by Jan. 21… and then things got really crazy. GME hit $70 the very next day — but it wasn’t done yet.
At one point Monday, the stock hit $160, a record high by a long shot. Yep, GameStop, which is expected to lose money this year, skyrocketed more than 1,100% in a matter of two weeks. And today, the party is still going as it was up another 24% just after the market opened. Heck, even billionaires are getting in on the fun.
Lots of $GME talk soooooo….
We bought Feb $115 calls on $GME this morning.
— Chamath Palihapitiya (@chamath) January 26, 2021
So all this action caused a massive gamma squeeze, and GameStop short sellers have gotten absolutely crushed.
Check out my video and let’s go in-depth on GameStop short selling as market momentum narrows. I’ll explain exactly how this happens, and how Citron likely wiped 20% off its book… Wrecked by small-time traders on Reddit — a true David vs. Goliath story on Wall Street.
Be sure to leave your thoughts, comments and questions below!
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