- Feb 2, 2009
- Reaction score
So these hedge funds were massively shorting GME (Gamestop). Also a few others like AMC Theaters. Basically means that they sold shares of a stock that they themselves didn't actually own. The idea behind it is that they believe that the stock will drop in price. So if they "sold" a share for $10...they are hoping the price per share will drop and by the time that they need to reimburse ("cover") the share...it will be cheaper than what they sold it for.Yeah I needed help with all this too. Still doesn’t make a lot of sense to me.
WSB (Wallstreetbets) decided that they wanted to stick it to the hedge funds that do this....because in many cases....these hedge funds have enough power in the market to manipulate stocks and drive the price down if they want. So they coordinated an attack in which they were doing nothing but buying, driving the price WAY up. Now...hedge funds like Melvin Capital have to pay an ENORMOUS amount in order to cover the shares that they shorted.