The story so far.
Shorting is selling shares that you do not own for delivery at a future date. Say the share is trading at €10 and you sell it for delivery in a month. You expect that the share price will drop and you will be able to buy it in a month for less than €10. That is perfectly respectable business practice
Now if you are a fancy Hedge Fund and you tell everyone that you are shorting Gamestop, people will think that is where the smart money is and that should push the price down. That is not respectable business practice.
If someone can buy up all the shares in the company then Fancy hedge Fund will be forced to buy at whatever price the seller wants as they must deliver the shares they have sold.
This is called a short squeeze. It happened in Volkswagen in 2008 https://www.ft.com/content/0a58b63a-4294-3e07-8390-c3aabef39a26
Recently a social media frenzy of daytraders bought up shares in Gamestop and created a short squeeze. It looks like great fun, but I wouldn't like to rely too much on owning shares in a company that is fundamentally worth about 10% of its current market cap.
Along comes Redit and Robinhood, they aggregate lots of
Shorting is selling shares that you do not own for delivery at a future date. Say the share is trading at €10 and you sell it for delivery in a month. You expect that the share price will drop and you will be able to buy it in a month for less than €10. That is perfectly respectable business practice
Now if you are a fancy Hedge Fund and you tell everyone that you are shorting Gamestop, people will think that is where the smart money is and that should push the price down. That is not respectable business practice.
If someone can buy up all the shares in the company then Fancy hedge Fund will be forced to buy at whatever price the seller wants as they must deliver the shares they have sold.
This is called a short squeeze. It happened in Volkswagen in 2008 https://www.ft.com/content/0a58b63a-4294-3e07-8390-c3aabef39a26
Recently a social media frenzy of daytraders bought up shares in Gamestop and created a short squeeze. It looks like great fun, but I wouldn't like to rely too much on owning shares in a company that is fundamentally worth about 10% of its current market cap.
Along comes Redit and Robinhood, they aggregate lots of