top of page

Let’s recap the madness around GameStop: A lot more losers than winners

Financial markets were rocked last month by the frenzy around GameStop. It was one of the biggest speculations in recent years. Let’s face it GameStop is a terrible company to buy, awful fundamentals and expensive price. Investment funds recognized that and took short positions. However this created an opportunity for “short squeeze”. As you know an populist group of trader started the frenzy for buying GME on the forum and began pumping up the price to squeeze those funds.

The idea for this move is that they buy the stock at $30, pump up the price to $100 and then funds have to cover their shorts and buy those shares at $100 and this makes very nice 300% profit. However this ONLY works for those who bought in the beginning! Because in order to pump up the price to $100 you need other fools to buy it as well at $50, at $60, at $110, and those fools are actually used by the initial group who started the squeeze.

Also social media works with a lag, so by the time the huge frenzy started the price was a lot higher, but this is what is required – more and more people buying into the speculation. It worked like chart the volume of shares that changed hands exceeded 100M in the hottest days of the frenzy. So when big funds started to cover these short positions, most of the people have bought the stock at very high prices and actually l