Reddit users harness the power of community to tank Gamestop hedge funds

Paawan Sunam
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Reddit Gamestop

A community on Reddit called r/wallstreetbets beat the stock market guys at their own game, by joining forces for Gamestop and showing that common people are more powerful than professional traders when they come together.

There are several financial terms, figures, and events that are unfolding at this point in time, which we will leave to the financial experts and we will only talk about the social factor in the picture, but first a short lesson on Shorts, where it all started.

Even if you have minimal knowledge about stock markets, you must be knowing that investors invest in a company's growth and success. For example, if I buy stocks of Gamestop, I am hoping that the company generates profit so that my stock prices go up, and I can sell them and earn the profit (the difference).

But short-sellers invest in a company's loss and failures. For example, they buy one share that is priced at 10 INR and sell it immediately at 10 INR. When the price drops to 6 INR, now they 'cover' buy one share at 6 INR and return it to the one they borrowed it from, so they make 4 INR on that share, the difference of which they first sold the share and then bought again to return it.

Also Read: Reddit acquires short-form video platform Dubsmash

A few weeks ago a user on Reddit, noticed a hedge fund had taken a massive amount of short trades against Gamestop. They convinced the community on the thread to buy Gamestop stocks, as many as possible. Forcing the short-sellers to lose money instead of making money, because Gamestop stock price was going up.

The hedge fund is now declaring bankruptcy their losses have surpassed its worth, which is more than ten billion. The guys on r/wallstreetbets are currently discussing staying prepared for a speculated SEC intervention.

This is the first time the stock market has experienced something like this (and the stock market has a lot of interesting experiences). But as they say, good things happen when people come together.