In order to avoid a stock crash, trading apps like Robinhood stopped the purchase of GameStop on their platform. While posts on social media claimed the fund had gone bankrupt, the company’s spokesperson denied the claims.Īfter hedge funds lost money, Wall Street demanded that short selling be made illegal even though it’s a practice commonly used by everyone. Melvin Capital lost 30 per cent of the $12.5 billion it invested in managing shorted stocks. Short sellers lost an estimated $23.6 billion on GameStop in this rally. Finally, last week, it caught the attention of many young online traders. This led to the share prices increasing to unwarranted levels. Though the post didn’t get any attention then, the user frequently tweeted about the retail store and the investment.
In mid-2019, a Reddit user (Roaring Kitty) posted a picture showing a $53,000 investment in GameStop. Reddit users noticed hedge funds were heavily short selling the stock, particularly the $13 billion hedge fund Melvin Capital.
Over the years, GameStop’s stock had been falling.
