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Money isn't conserved in the same way that matter is. Right now the market cap of gamestop is $22B, which is calculated by multiplying the share price times th
by jewel 6y ago
Money isn't conserved in the same way that matter is. Right now the market cap of gamestop is $22B, which is calculated by multiplying the share price times the number of outstanding shares. If some news comes out over the weekend that causes people to value the stock lower, we could see the first trade at $33/share instead of $330/share. $20B of money just disappears. It never really existed in the first place.
- fractionalhare 6y agoRight. At the same time, there would be a net loss of value because any shorts who were margin called on GME's meteoric rise will have blown up. Their investors will have lost (possibly all their) money at the same time retail investors found their asks unfulfilled at $330 because the bids crash landed at $33. In this scenario both the short funds and the retail investors are fucked. A select few retail investors and some of the momentum-trading quants do well. But the majority of the money on either side just evaporates - rapidly. In a more distant but plausible scenario, this hits a bunch of funds across a bunch of tickers, and it goes systemic. They liquidate their longs trying to survive, and when it's not enough it rolls up into their brokers who are left holding the bag.