Minnows make whales quiver
An internet brigade on heavily shorted stocks is sending big players in the US into a frenzy.
Small-time traders in the US market, mostly linked by their use of the Reddit forum ‘Wallstreetbets’, realised in recent weeks that hedge fund investors had bet against the fortunes of brick-and-mortar video games retailer GameStop, aging tech darling Nokia and several other firms.
Using publicly available information, discussed in public, a movement began to buy these shares. They have actively campaigned to send a message to Wall Street elites by forcing them into a failing position. It has been compared to the Occupy Wall Street movement of the 2010s.
Short-selling requires the big investors to buy back stock they have borrowed, risking portfolio loss if the position has appreciated in value. For some big backers, they may have to pay over a thousand per cent of what they had planned, potentially crippling them. It is what traders refer to as a “gamma squeeze”.
It has been described as a ‘Robin Hood’-type situation, which took an ironic turn when the investment app Robinhood appeared to side with institutional investors and block its own small-time customers from buying GameStop stock. Several other trading apps have followed suit. Angry customers are beginning to file legal actions against the financial establishment, which has been pulling the many levers available to it (political, media and shady backroom discussions) to prevent being caught short.
The situation is complex and rapidly changing, but being covered in detail by tech Youtuber Louis Rossman. His language may not be safe for work, but his understanding, perspective and detailed analysis are difficult to top.