What really happened last week between the Hedge Funds and Redditors? In this video, RFG Advisory CIO Rick Wedell explains how a group of individual investors on the internet were able to drive the price up on GameStop and AMC, putting certain hedge funds in a precarious position.
Last week, GameStop and AMC were in the headlines as their stock prices grew exponentially. At one point, GameStop was up almost 1200% on the year, pushing the market cap of the company to almost $11B. This huge price movement caused quite a ripple effect in the market as many hedge funds had very large short positions on this stock, meaning they were betting that it was going to go down. This price movement meant billions in losses for some hedge funds as they scrambled to buy up GME to hedge their losses, causing what is known in the industry as a “short squeeze.” With both internet investors and hedge funds buying large amounts of the stock at the same time, the market price of GameStop climbed exponentially in a short amount of time.