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Institutional investors were betting that GameStop (GME)'s stock price would fall, redditors were betting that it would rise. So far the redditors are winning.

Institutional investors were betting that GameStop (GME)'s stock price would fall, redditors were betting that it would rise. So far the redditors are winning. Early on, the bets had some basis in reality, but now it's become more of a speculation game. Yesterday, two of the big institutional investors decided to fold, effectively loosing 100% of their investments. Edit: or, potentially more. The same thing has started happening to a few other stocks. I linked to the Bloomberg Money Stuff column a couple of other places, but I'll post the links here too for a more thorough (and humorous) overview: Monday: https://www.bloomberg.com/news/newsletters/2021-01-25/money-stuff-the-game-never-stops https://www.bloomberg.com/news/newsletters/2021-01-25/money-... Tuesday: https://www.bloomberg.com/opinion/articles/2021-01-26/will-wallstreetbets-face-sec-scrutiny-after-gamestop-rally https://www.bloomberg.com/opinion/articles/2021-01-26/will-w... Yesterday: https://www.bloomberg.com/opinion/articles/2021-01-27/reddit-driven-surge-puts-gamestop-and-ryan-cohen-in-a-weird-spot https://www.bloomberg.com/opinion/articles/2021-01-27/reddit...

Traster 6y ago
>Yesterday, two of the big institutional investors decided to fold, effectively loosing 100% of their investments. They can lose much more than the total value they initially invested into the shorts, since they have to buy back at several multiples of the price of the stock at the point they bought and they had heavy borrow costs too. That's why the hedge funds are at risk of going bankrupt - because they aren't only liable for the value they invested but they're liable for the whatever cost it takes to buy back the stocks they shorted.
- nfriedly 6y ago
  You're correct. The 100% number came from a video that someone at Citron Capital posted. I can't find the actual video, but it's quoted at https://www.bloomberg.com/news/articles/2021-01-27/melvin-capital-closes-out-its-gamestop-position-cnbc-reports https://www.bloomberg.com/news/articles/2021-01-27/melvin-ca... However, I'm not sure about Melvin - they may well have lost more than 100%.

Traster 6y ago

>Yesterday, two of the big institutional investors decided to fold, effectively loosing 100% of their investments. They can lose much more than the total value they initially invested into the shorts, since they have to buy back at several multiples of the price of the stock at the point they bought and they had heavy borrow costs too. That's why the hedge funds are at risk of going bankrupt - because they aren't only liable for the value they invested but they're liable for the whatever cost it takes to buy back the stocks they shorted.

nfriedly 6y ago
You're correct. The 100% number came from a video that someone at Citron Capital posted. I can't find the actual video, but it's quoted at https://www.bloomberg.com/news/articles/2021-01-27/melvin-capital-closes-out-its-gamestop-position-cnbc-reports https://www.bloomberg.com/news/articles/2021-01-27/melvin-ca... However, I'm not sure about Melvin - they may well have lost more than 100%.