GameStop’s stock has become a battleground in the last week, waged between short-seller Citron Research and devotees of Reddit trading community r/wallstreetbets. Here’s a quick rundown of why the company’s stock has seen an 83% gain, and why its unprecedented rally has been so controversial.
GameStop’s stock sat well below the $10 for most of 2020 until August, when Chewy founder Ryan Cohen bought a large number of shares, pushing the price up. After becoming the company’s largest private investor, Cohen tried to discuss changes to the company with management, and later ended up sending a letter to the board detailing how the company could be turned around.
In the letter he noted that GameStop’s stock was one of the most shorted around, referring to short selling, a practice where investors can sell borrowed stock that they think is going to decrease in value, then buy back at a lower price, thus keeping the difference as profit.
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Source: Game Spot Mashup