The GameStop Rebels vs. “Too Big to Fail”
Last week, a large number of small-time investors drove up the price of GameStop’s (GME) stock a historic 1,784 percent. But this was no mere spike in some obscure stock. The stock’s price spiked in part as a result of efforts by “an army of smaller investors who have been rallying on Reddit and elsewhere online to support GameStop’s stock and beat back the professionals.” These professionals were hedge fund managers who had shorted GameStop’s stock. In other words, hedge funders were betting billions that GameStop’s stock would go down. But the price went up instead, meaning hedge funds like Melvin Capital (and Citron Research) took “a significant loss,” possibly totaling $70 billion.
There surely were plenty of insiders on both sides of this deal. Given the complexity of various schemes employed by seasoned investors, it seems it is very unlikely that this is just a simple matter of little Davids taking on Wall Street Goliaths. But it also looks like that’s not all that was going on. Had this only been just another scheme by some Wall Street insiders against some other Wall Street insiders the story would probably have ended there.
But that’s not what happened. Rather, it appears that, for many of the smaller investors who were involved, much of this “short squeeze” was conducted for the purposes of throwing a monkey wrench in the plans of Wall Street hedge funds which exist within the rarified world of billionaires and their friends.
Pro–Wall Street Fearmongering
The reactions to the event from media pundits and other commentators were telling in that there was clearly fear and outrage over the fact that business as usual on Wall Street wasn’t being enforced. Predictably, much of the reaction to the Reddit rebellion was to label it a “fiasco,” “insanity,” and s
Article from Mises Wire