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GameStop stock hits new highs as Redditors and stock market short sellers wage war

GameStop stock hits new highs as Redditors and stock market short sellers wage war

January 25, 2021 | By Alissa McAloon

The past few years have been a wild ride for GameStop, but the past week or so has been an absolute rollercoaster for the company's stock prices. Looking at just today, GameStop's stock prices ranged anywhere from $61.13 to $159.18 a share, reaching a new 52 week high just before 11 AM only to ebb and flow its way to a $65.01 close.

This all comes despite the fact that GameStop isn't posted to turn a profit for a good couple of years at least. Those responsible for GameStop's most recent burst of chaos have little care for the company's overall survival.

Instead, the fluctuations represent a months-long gamble from groups like Reddit's WallStreetBets that play against deals made by short sellers trading on the expectation that GameStop's share prices would stay low.

Those short sellers aim to borrow shares from folks with a stake in GameStop and sell them, with the expectation that they'll be able to turn around and repurchase those shares when the stock price dips even lower. The shares would then go back to their original purchasers, and the short sellers in the middle would pocket the difference. This plan doesn't work nearly as well, however, if the stock prices start to suddenly rise and put short sellers on the hook to the original investors for the difference in price, which is exactly what happened with GameStop this month. This story from Vice offers a good look at the short squeeze taking place over GameStop, but some argue that the debacle goes beyond even that.

A recent story from Bloomberg digs into exactly how this whole affair came to pass, and it starts a good year and a half before the debacle started making headlines this week. In short, a sizable group of day traders in Reddit's WallStreetBets went in on GameStop, banking on a rise in the company's share price that was eventually helped along by GameStop's addition of founder Ryan Cohen to its board amid its ecommerce re-focus and other factors. The Bloomberg story traces this crusade from its earliest days to today's new peak, and is well worth a read to get a fuller picture of the chaos, and how battles between Reddit users and short sellers escalated to the point we're at today.

Business Insider, meanwhile, estimates that short-sellers have lost $3.3 billion by betting on GameStop this year while, on the other side of the fence, one of the Reddit users named by Bloomberg seems to have turned their $53,000 investment into $11.2 million.

At this point, GameStop has yet to comment on the war it seems to have unintentionally ignited while trying to turn its own financial misfortunes around.

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