The GameStop Saga Isn’t About Finance, It’s Part Of The Ongoing War Between Elites And Populists

The traditional way to make money in stocks was to find a company that was worth more than what its stock price indicated, purchase the stock at a bargain, and then make your money either through the company's distribution of its profits back to its equity owners or the appreciation of its stock price.

To make money off a company that's not making any, you "Short" its stock by borrowing a share from an existing owner, immediately selling it and getting the cash proceeds from the sale, and then buying back the stock when its price dips and returning the share to the original owner.

If you short a stock at $50 - you borrow the stock, and immediately sell it at the current price of $50 - the most you'll earn is $50. When the stock approaches $0, you'll buy it for pennies, return the share back to the investor from whom you borrowed it, and the difference is your profit.

The same goes for the various baskets of options and stock derivatives that can be used to mimic the payouts of stock shorts.

The Redditors realized they could pull off what's known as a "Short squeeze": If they started buying up GameStop stock and refusing to sell it, they could crush the hedge fund as its short positions came due, potentially even driving it into bankruptcy, all while profiting in the market by purchasing a stock that was once in the single digits and watching it approach $50 and then $100 and $200 and even $300. At one point, it was estimated that the losses accumulated by GameStop short-sellers approached $5 billion.

Suddenly, the federal Securities and Exchange Commission, or SEC, which purports to be a Wall Street regulator but instead operates as little more than a Wall and Broad soothsayer to a public skeptical of Wall Street's power, weighed in and intimated that it might investigate or even shut down the trading of GameStop stock to prevent the price from getting even higher.

Then the Wall Street-backed trading apps and the Wall Street brokerages joined in, announcing they would no longer allow their users and retail investors to buy GameStop stock.

https://thefederalist.com/2021/01/29/the-gamestop-saga-isnt-about-finance-its-part-of-the-ongoing-war-between-elites-and-populists/