The Daily Populous Thursday January 28th, 2021 day edition
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theredditbandid on January 27th, 2021 at 16:13 UTC »

What happened with Gamestop? Weren’t they going bankrupt a fee years ago?

TechnoGamer16 on January 27th, 2021 at 16:38 UTC »

Lemme guess, WallStreetBets?

Nautis on January 27th, 2021 at 18:31 UTC »

ELI5 Version for /r/all.

Lets say you're at lunch, and your friend has some oreoes. You tell him "Hey, if you give me 10 oreoes, then I'll give you this 5 cent stick of gum, and then next week I'll give you 10 oreoes." That weekend you go to the grocery store and oreoes are on sale for 5 cents cheaper than normal, so you buy 10 and give them to your friend. Because they were on sale this week, you successfully "shorted" oreoes.

The situation we have now is you (Melvin Capital) got greedy. You were expecting a huge sale this week with dirt-cheap oroes(gme stock), so last week you traded for every oreo in the world and then some (140% float), then sold them all. But your coworkers Chad and Veronica (wallstreetbets) saw what you were doing and just how greedy you were. Chad and Veronica know that this week you owe a lot of oreoes to a lot of people. Now Chad and Veronica have bought every oreo on the market, knowing that you'll need to come to them to buy them back. Between them they have a monopoly on the oreoes, so if neither of them are willing to sell (diamond hands) then they can essentially charge you whatever they want. They're doing what's called a "short squeeze".

Eventually, when Friday at lunch arrives, you must pay back the people you borrowed from. It's in the contract you signed, and by the way, the bank will take everything you own if you don't.

Now, the metaphor breaks down a little here, but I'm betting Melvin Capital tries to make a case that this was market manipulation, which is illegal, on the part of WSB (it wasn't). Market manipulation can occur in a lot of different ways so I'll focus on how Melvin will claim this was manipulation. Most relevant to this case would be when one really big centralized entity, or alternatively several smaller but privately coordinated entitites, create a monopoly on a market to force a short squeeze. First, this does not apply in this case because we're talking about a bunch of small and independent entities. Second, /r/wallstreetbets is a public forum with varying and more-often-than-not conflicting views, so alleging private coordination is one hell of a stretch. /r/wallstreetbets is a news/opinion/meme forum, not an investment club. Melvin just so happened to make a very greedy and very public mistake which a lot of non-institutional investors noticed and decided to capitalize on. Cynic that I am, I fully expect to see the SEC make some new BS rule preventing non-institutional investors from capitalizing on mistakes like this again in the future since, y'know, a lot of powerful people won't like the idea that plebs can take them down if they get too greedy. Woo! Crony-capitalism!