I don't speak stock market
Can someone explain the game stop thing to me ?
If you didn't get an answer already, I'm going to take a shot before catching up on the thread and see if I actually even understand it myself. Here goes:
A very large number of people got together on Reddit and agreed to all buy stock in Game Stop. And they continued to buy over a fairly long period, so the stock price rose steadily until it was far out of line with a realistic, i.e. non-manipulated, estimate of the actual value of the company. Next, hedge funds noticed it was way over valued and attempted to engage in their own manipulation on the assumption that the price had to go down at some point. This involves heavy financial commitment from the hedge funds that they don't have covered in actual assets. The hedge funds can only sustain this position for so long before their debts come due (as far as I understand it) but the Redditors kept investing so the price kept going up anyway and now the hedge funds are caught with their short pants down.
Here's another example of short selling from google,
"Example of a Short Sale
For example, if an investor thinks that Tesla (TSLA) stock is overvalued at $625 per share, and is going to drop in price, the investor may "borrow" 10 shares of TSLA from their broker, who then sells it for the current
market price of $625. If the stock goes down to $500, the investor could buy the 10 shares back at this price, return the shares to their broker, and net a profit of $1,250 ($6,250 - $5,000). However, if the TSLA price rises to $700, the investor would lose $750 ($6,250 - $7,000)."
Note it only makes you a profit if the price goes down. But then there's also the vig for the time the borrow owes the broker the stocks. You can't keep paying maintenance on a loan forever and remain in business, effectively.
