![]() Holding the stock as an attempt at getting justice makes sense, especially from the perspective of an online community full of Millennials, who have had their economic future crippled by Wall Street financiers through three consecutive “once in a generation” market crashes. Moreover, the Redditors live in a world where the committee investigating the blatant fraud surrounding GameStop is led by a woman who accepted six-figure fees from the defendant. It is not inherently irrational for someone to buy a consumer good, no matter how strange. Gambling is a form of consumption spending, an end in itself. In addition, the Redditors who initially popularized the stock have a reputation for treating the stock market like a casino, as evidenced by the name of their community, r/wallstreetbets. The Redditors’ strategies are nothing that Wall Street has not tried before. So why does the corporate press describe this phenomenon as a “ bubble” that is “ irrational, insane, and dangerous,” the product of the “ hysteria” and “ cognitive bias” of investors who “ don’t know what they’re doing”? Short squeezes are not new. With this in mind, Redditors hold GameStop under the perfectly rational desire to avoid getting tricked out of their money, and many more profess a willingness to hold despite losses if it means that hedge funds will be punished through bankruptcy for manipulating the market. Historical examples such as the Volkswagen short squeeze of 2008 suggest that even a short interest as low as 50 percent could still yield high dividends for GME stockholders. Hedge funds have been shutting down retail brokers, trading among themselves after hours, and publicly claiming to cover shares they had not yet bought, all in an attempt to lower the price on the stock, minimizing losses for the hedges when they finally cover the shorts. After hearing that hedge funds had shorted the stock of the dying retail chain GameStop by over 100 percent of shares, Redditors banded together to buy up the stock, knowing that short sales do not expire, so the hedge funds will eventually be forced to buy it all back at a drastically raised price.Įstimates of short interest on the stock from sources such as the NASDAQ, MarketBeat, Yahoo Finance, and Bloomberg range from 53 percent to 177 percent of float. ![]() This year has been interesting for Wall Street, to say the least. Listen to the Audio Mises Wire version of this article. ![]()
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