GameStop Capitalism Wall Street vs. The Reddit Rally (1)

But while some claim that there is nothing new under the sun, in an interesting turn of events over the last few day of January 2021, some hedge fund managers on Wall Street became the ‘unusual suckers’, losing billions of dollars from shorting GameStop (stock ticker GME). 3  For those not in the know, a hedge fund is an investment fund for the very wealthy (or the 1%) and its managers and analysts typically trade relatively liquid assets and take advantage of leverage (borrowing money) and risk management techniques such as short selling (betting that the price of company stock will go down rather than up). Short selling typically involves a hedge fund manager borrowing shares in a company from a broker and then selling them on the market to realize the money. This is done in the hope that the share price will plummet (for whatever reason, e.g. bad financial reports, costly lawsuits, new regulations, outdated business model). As the shares decrease in value, the hedge fund can repurchase the amount of shares borrowed from the broker at a lower monetary value and return them to the broker, thus making a profit.

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