![]() In 1919, Clarence Saunders of Memphis, Tennessee, founded Piggly Wiggly, the first modern grocery chain. So, what does that have to do with Piggly Wiggly? Surprisingly, a lot. According to NBC News, short sellers have already lost $23.6 billion on GameStop this month. Motivated apparently by both a desire to dismantle a financial system they view as unjust and by personal nostalgia for GameStop and similar companies, and egged on by tweets from Elon Musk and other celebrities, these amateur investors are wreaking havoc on the powerful hedge funds that bet against GameStop. That’s what these Reddit users are doing at a massive scale, buying up GameStop stock to drive up the price and prevent the hedge funds from cashing in on their gamble that the company will fail. On a popular Reddit page called r/wallstreetbets, individual investors started a coordinated effort to drive up the price of GameStop stock and create what’s called a “short squeeze.” What’s a short squeeze? Well, remember that a short sell uses borrowed stocks a short squeeze is an attempt to temporarily raise the price of the stock so the short seller has to buy the stocks back at a higher price. This is pretty standard procedure for hedge funds and professional money managers, but this time something unexpected happened. Shorting a stock is a bet that the company will fail. If the investor buys the stock back when it drops to $50, he can return the stock and pocket a $50 profit. For example, say an investor borrows a stock at a $100 price tag and immediately sells it for $100. This is when a professional investor borrows a stock, sells it, then waits for its price to fall before buying it back and returning it. Sensing that these companies were in decline, professional investors and money managers started betting against them by short selling or “shorting” the stock. Video games and movies can now be easily streamed and downloaded in the comfort of your own home, and the Blackberries that we used to rely on now seem like quaint relics compared to the supercomputers in our pockets today. As the New York Times notes, these companies have been struggling for years as evolving technology makes them less and less relevant. It’s a David-and-Goliath story that has captured the nation’s attention, but what most people may not know is that almost a century ago, a Tennessee grocer named Clarence Saunders took on Wall Street alone, and he almost won.įirst, we need to understand what is happening today with stocks such as Blackberry, AMC Theaters, Blockbuster, and most notably, GameStop. Fueled by viral posts on Reddit and, now, by national media coverage, people across the country are joining forces to take on some of Wall Street’s biggest hedge funds. As most people are aware by now, something really strange is happening in the stock market. Not since Margot Robbie drank champagne in a bubble bath and explained what subprime mortgages were in the “The Big Short” have so many people been talking about what it means to “short” a stock.
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