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GameStop saga exposes deep hypocrisy from elite investors and proves US financial market is detached from reality

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28.01.2021

American video game retailer GameStop has made a splash in the news this week after a showdown took place between hedge funds attempting to short sell the company’s stocks and Redditors attempting to fight back. After a hard-fought battle, the folks over at r/WallStreetBets scored a victory when a heavily battered Melvin Capital closed out its short position in Gamestop, putting several things plain on display – mainly, the utter absurdity of the US financial market.

The stock market is relatively simple: you buy a stock and if the stock goes up in value then you make money since it's worth more than what you paid for it. Short selling, however, operates on the exact opposite principle. Instead, under this scheme, short sellers make money when stocks go down in value.

In a nutshell, short sellers borrow another’s stock and then sell them, betting that they will go down in value so they can buy them back later for cheaper and then return the share to its original owner while keeping the difference for a profit. It’s a fairly straightforward process that happens all the time on Wall Street.

Hedge funds believed that with brick and mortar shops closing up all across the world because of the Covid-19 pandemic, GameStop would be no different. After all, large online retailers like Amazon are where the real growth potential is because of the........

© RT.com


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