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"To “short” a company is to bet on the price of the stock falling, in simple terms. The hedgefunds would borrow shares of the company from other investors, sell the shares on the markets at the current high price, then buy them back at the expected future low price, and return them to the investors, pocketing a profit.

2 questions:

1. Why would "other investors" in the description above, let the HF "borrow" the shares - why wouldn't they just sell at the initial high price and pocket the money? Guess I'm not understanding the short-sell process...

2. Why is this such a big story? Isn't GAMESTOP a shrinking, tiny outfit? Like Blockbuster videos was? This isn't a company like Toyota or Microsoft, we're talking about. I don't get it....

Why would "other investors" in the description above, let the HF "borrow" the shares -

If you're using margin to finance your purchases, your broker can lend some of your shares out, to get the cash you need to cover your margin loans. You and your broker can earn interest on the shares lent out.

Online brokers, such as E-Trade, Interactive Brokers, Fidelity and Charles Schwab, offer this option. The fees are typically split equally with the broker.

The brokerages lend out the securities to third parties such as traders who want to sell short, says Andrew Wilkinson, chief market analyst at Interactive Brokers. Individual retirement accounts, or IRAs, are also eligible to participate in the stock lending program.

Lending stock to short sellers on Wall Street means that investors will receive "interest on the cash collateral posted to their accounts for the loan based on market rates," he says. Other brokerages pay a fixed rate for a fixed term.

"We split the fee received from lending stock 50-50 with the client," he says.

Lending and borrowing programs are an advantage for those who "may enhance the yield on the stock sitting idle in his or her account," Wilkinson says.

https://money.usnews.com/investing/investing-101/articles/things-to-know-about-lending-shares

2. Why is this such a big story? Isn't GAMESTOP a shrinking, tiny outfit? Like Blockbuster videos was?

It's a big story not because of the company but because of the action. Greedy Hedge Fund guys shorting,shorting,shorting,and shorting a small declining company. They weren't content with making money beating a company into the ground, they wanted to stomp his guts out. And in so doing exposed themselves to some small would be Davids against the Goliath. Their exposure subjected forced them buy these shares at whatever the price and so these people bought in to force the price up, causing great anguish to these Hedge Funds not used to being on the receiving end of a beating. They're used to giving them.