Going back to our example with Ben, if he sold 1,000 shares of XYZ but the market only had 900 shares of XYZ trading a month later, he wouldn’t have 1,000 units to give back to Jerry. Translation: Hedge funds sold more shares but there weren’t enough shares in the market for them to buy back. On WSB, reddit users caught on to the fact that hedge funds have shorted more GME stocks than there were trading in the market. But even if GME’s price went up, these hedge funds probably predicted that the increase would be small enough that it wouldn’t really impact their bottom line.īut these aren’t usual circumstances that we’re dealing with. Under usual circumstances, the chances that GME’s price goes down could have been high. They’ve got analysts that make predictions based on data and probability. Hedge funds don’t make these bets arbitrarily. These hedge funds assumed that GME (among other companies) wouldn’t survive the pandemic as GME’s business was largely dependent on foot-traffic to their physical retail stores. Now in the case of GME, this is exactly what hedge funds did. He makes a cool $4,000 profit and returns the 1,000 units back to Jerry. If Ben is right, and the XYZ drops to $6 next month, he buys back 1,000 units of XYZ for only $6,000.
Ben takes these shares and sells them on the market, say, at $10. Jerry says okay and, theoretically, gives Ben those 1,000 shares. Ben goes to Jerry and says, “Hey, Jerry could you lend me these 1,000 shares now, and I’ll give them back to you by next month?” Ben knows that Jerry owns 1,000 units of XYZ. Ben thinks that Stock XYZ’s price is going to go down next month. A broker, or investor “borrows” shares from another broker, or from its own pool of shares.
How can one sell shares they don’t own? Well, short-selling is actually a form of borrowing. Essentially, he’s betting that the stock price will go down. Short-selling is the exact opposite of this.Īn investor who short-sells basically sells shares that he doesn’t have right now in the hopes that he can buy those shares back again at a cheaper price in the future. We all know the adage ‘buy low and sell high’ – you buy a stock now hoping to make a gain when its price goes up in the future. What does shorting a stock, or short-selling mean? This discovery was the catalyst for the stock market mania we’re witnessing now. Then in December, reddit users discovered that institutional investors such as hedge funds had made huge bets that GME’s price would keep going down - these hedge funds had shorted GME. Users on WSB started posting their positions in GME all the way back in early 2020, sparking some interest in the forum. To explain that we need to go all the way back to the beginning. How did it happen so quickly? And what’s the hype all about? The analyst says it’s hard to be optimistic even with the theater business beginning to recover.Some retail investors have reportedly made millions in earnings because of this massive rally around GameStop. While that increased price target is nothing to sneeze at, Pachteris still keeping his neutral rating for one of Reddit’s favorite stocks. The analyst increased his price target for the company’s stock from $2.50 per share to $5 per share.
#R wsb gme update
That’s something the company has been moving toward already as its physical business suffered even before the novel coronavirus pandemic.ĪMC Entertainment (NYSE: AMC) stock is up next with an update from Wedbush analyst Michael Pachter. Cohen, the co-founder of Chewy (NYSE: CHWY), will take command of the company’s Strategic Planning and Capital Allocation Committee.Ĭohen’s goal is to transform GameStop into a company that focuses more on its digital business. Starting with r/WSB darling GameStop (NYSE: GME), GME stock is on the rise following news that Ryan Cohen is leading a change at the company. GME) up 70% with the Reddit logo in the background." width="300" height="169">
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