The long standing cold war between small retail investors and big hedge funds have yet again emerged thanks to some company called GameStop. If you are someone who already knows about this case and is tired of hearing about it everywhere, I'm sorry but I had to jump into the bandwagon. But if you are someone who lives under a rock and doesn't have any idea who or what GameStop is, allow me to take you to this fairytale worthy of a journey:
Once upon a time, there was a company called GameStop. Just your average plane jane, struggling in her life to make some good old profit but fate had something else planned for her. Her evil step mother, who goes by the name of Melvin Capital wanted to ruin her life and bring her to dust. She started short selling her step daughters precious little shares in bulks. And soon GameStop started decreasing in value. Lesser and lesser she became, lesser became the chances of her revival. Then comes her night in shinning armour. WallStreetBets belonged to the reddit family, who were long time enemies of hedge funds, the family to which Melvin Capital belonged. WallSB felt bad for GameStop and how Melvin was exploiting her. He identified her weakness and wanted to take revenge for all the torture her family had given to his. He bought all the available shares of GameStop so that Melvin can't square off her position. And lo and behold, indeed Melvin couldn't square off her position and sunk deeper and deeper into debt. Legend has it that Melvin didn't short sell any shares from thereon and is filling for bankruptcy.
But this fairytale isn't as rosy and Charming as it seems, just like stock market is. Although the story revolves around GameStop, it had nothing to do with it. It was all about family feud of Hedge funds and Retail Investors. While retail investors try to make a buck here and there by following tips of investment gurus, hedge funds manipulate the market with the strong cash flow they have. But this time, it backfired. A hedge fund became so greedy that it sold 140% of stocks available in market for trading and hence, it had to face the consequences of disrespecting the basics of demand and supply. Although this is a big day for retail investors, this is no news to hedge funds. Squeezing the market to the last drop of profit is very common among big giants like this. Just because one failed, doesn't mean they'll stop doing it. In this perfectly competitive market, they'll soon find another loophole for using the greed of retail investors against themselves. And for those retail investors who think they won this match, don't forget that a lot of retail investors followed the footsteps of Melvin Capital and short selled GameStop as well. And most importantly, don't forget that trading is a full time job which requires years of practice and not something to be done beside your job. At the end of this fight between Retail Investors and Hedge funds, Short selling lost.