Reddit vs. Wall Street in the Tug of War with Game Stop Stocks

It’s day four of the battle between Reddit users and Wall Street over GameStop stock. 

When the Chewy co-founder and former CEO Ryan Cohen joined GameStop’s board earlier this month, the stock jumped in the hope that he would bring in a wave of change. This stock gain thus ushered in hedge funds and traders betting against the stock — shorting it.

Reddit users from the subreddit /r/wallstreetbets, which boasts over 2 million users, saw this position and started buying up stocks in GameStop. In turn, this has caused major short squeezes in the stock. The stock rose from $17 a share to up to $230 as of late yesterday. GameStop was the most traded in the U.S. stock market on Tuesday, according to CNBC.

Now, hedge funds, primarily Melvin Capital Management, are losing money and investors are angry. Short sellers have lost more than $5 billion in the stock. According to the Wall Street Journal, it looks like Melvin Capital is getting an investment of $2.75 billion from two other hedge funds to account for all their losses in the past year.

Michael Burry, a well-known investor featured in “The Big Short,” has since deleted a tweet from yesterday in which he referred to the GameStop trading as “unnatural, insane, and dangerous,” according to CNBC. He also voiced his desire that there be legal ramifications. Another short seller referred to those online users as an “angry mob.”

This isn’t the first time /r/wallstreetbets made news during the pandemic — last year when Hertz filed for bankruptcy their efforts to direct people to buy up the stock were linked to possibly helping it rise 500 percent.

GameStop looks like a star in this story, as its stock prices skyrocketed in such a short period of time, but it’s just a pawn in the game showing how bizarre the stock market truly is.