This week has been a historic one for the stock market as some of the biggest Hedge Funds on Wall Street are at risk of going under. The entire scenario is wild and it's all thanks to the fine people over at r/wallstreetbets, who noticed that Melvin Capital was shorting 140% of GameStop's stock. For those who don't know, shorting is when you take out stocks as a loan and immediately sell them at the current market value. This is a move that required infinite risk, as you're banking on the stock to go down so you can buy them back and repay your loan at a profit. However, if the stock goes up, then you're on the books for the difference.
With this in mind, many retail investors flocked to apps like Robinhood so they could put money into GameStop. This led to a price hike from $20 per share to $300. These Hedge Funds are required to pay back their loans soon, which means a short squeeze is imminent. Unfortunately, Wall Street won't let the little guy win and now, investment apps are banning people from buying GameStop and other heavily shorted stocks. Many are upset about this and it's led to a lot of questions.
NBA star JaVale McGee recently gave his take on it all, asking his followers why the stock market wants to see businesses fail. To answer the question, because shorting stocks make it profitable to wish ill upon businesses, regardless of how big or what sector.
https://twitter.com/_/status/1354839190475841546
"I’m coming to you Twitter how can the government stop people from trading game stop and AMC which technically makes the stock go down but they’re doing it because they don’t like the fact that people are buying and the stock is going up?" McGee wrote.
AMC is one of the other stocks that was banned today and it just so happens to be another heavily shorted company. Other such companies include Nokia, Blackberry, and a whole host of others. These shutdowns have led to outcries and social media and it's clear that apps like Robinhood are in for a world of hurt.
