An analysis of the losses incurred by hedge funds in the GameStop crusade launched by retail investors indicates that “short squeeze” has already cost short sellers up to $ 19 billion.
Data provider Ortex said that, according to its analysis provided to Business Insider, the targets of the “short squeeze” operation by members of a Reddit investment group were on track to lose up to $ 19 billion.
And that was only at the end of Friday.
The celebrated action by retail investors was hailed as a David and Goliath story by some, but others criticized it as market manipulation.
The scheme developed after the Reddit group realized the hedge funds that were taking too much advantage of their bet against GameStop, a traditional video game dealer. By inviting its members to buy the shares, Reddit’s retail investors raised the price and forced gamblers against GameStop into a precarious and expensive position.
The short squeeze operation caused GameStock’s stock price to skyrocket from around $ 5 per share in August, to $ 325 per share at the end of Friday’s stock market session.
This 6,400% increase in share value forced a hedge fund to secure emergency financing to pay for its losses.
Ortex called the GameStop battle “the first major battleground in an emerging war between individual investors and Wall Street institutions” in a blog on Thursday.
They estimate that other short sellers lost more than $ 70 billion to American companies this year alone.
“Regardless of the end result, the GameStop saga points to an increasingly democratization of markets, with fairer access and a more equitable playing field. The advantage of the information that has maintained the status quo for so long is disintegrating and has far reaching consequences for investments, markets and the industry itself ”, they explain.
Critics of the Reddit rebellion noted that many retail investors will almost certainly lose a lot of money if and when GameStop’s shares collapse on Earth due to the artificially inflated price.
Here’s more about the GameStop uprising:
The GameStop sharing frenzy starts again
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