› UKTH forums › 🎧 PC & Laptop Gaming › Other Stuff etc. › Class-action lawsuit filed against Robinhood following outrage GameStop stop Oops! Melvin Capital A $13bn hedge fund “short squeeze” New York (CNN Business)A Robinhood customer filed a class-action lawsuit against the stock-trading app Thursday after the company barred traders from buying shares... › Reply To: Class-action lawsuit filed against Robinhood following outrage GameStop stop Oops! Melvin Capital A $13bn hedge fund “short squeeze” New York (CNN Business)A Robinhood customer filed a class-action lawsuit against the stock-trading app Thursday after the company barred traders from buying shares…
The Short Story:
A $13bn hedge fund has been left with huge losses after an army of amateur investors coordinating via social media pumped up the price of video game retailer GameStop tenfold in just a few weeks.
Melvin Capital had bet against GameStop by short-selling its shares, meaning it stood to gain if the price went down and lose if it went up.
Members of the Reddit thread “wallstreetbets” decided to pile in to GameStop with the aim of pushing up the share price to inflict losses on short-sellers including Melvin Capital.
The move, known as a “short squeeze”, saw GameStop’s shares surge from a little over $17 at the start of the year to almost $150 when trading closed on Tuesday.
It then more than doubled again in after-hours trading after Tesla boss Elon Musk, who has had his own battles with short-sellers in the past, tweeted to his 42 million followers “Gamestonk!”.
Hedge funds and others that bet against GameStop have collectively lost more than $5bn, according to data analytics company S3.
Melvin Capital boss Gabe Plotkin told CNBC that his fund had closed its position in GameStop on Tuesday. That came after Melvin Capital’s backers Citadel and Point72 pumped almost $3bn into the fund to keep it afloat.
Another short-seller, Citron Research, was also stung by GameStop’s meteoric rise. Citron boss Andrew Left told Bloomberg he had covered most of his short position “at a loss of 100 per cent”.
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In a completely sane world, madness is the only freedom (J.G.Ballard).
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