When the price of GameStop ran up from $20/share to $380/share there had to be investors buying at $380. These weren't amateurs buying in at $380/share. Most of the stock sales at the inflated price were being made to buyers who were FORCED to pay that exorbitant price — i.e., hedge funds that had shorted the stock weeks or months ago and had to meet margin calls because they had borrowed heavily to sell them short in the first place.
If the losers in this kind of fiasco were "a bunch of millenials with no investing experience," you wouldn't be seeing big-time players on Wall Street falling all over themselves to put an end to it.
Are they jumping out of windows yet?
I think you have it all wrong.
When the price of GameStop ran up from $20/share to $380/share there had to be investors buying at $380. These weren’t amateurs buying in at $380/share. Most of the stock sales at the inflated price were being made to buyers who were FORCED to pay that exorbitant price — i.e., hedge funds that had shorted the stock weeks or months ago and had to meet margin calls because they had borrowed heavily to sell them short in the first place.
If the losers in this kind of fiasco were “a bunch of millenials with no investing experience,” you wouldn’t be seeing big-time players on Wall Street falling all over themselves to put an end to it.
Yep. Basically what happend was that some savvy investors on Reddit had spotted GameStop being over shorted by more than 100% of the available shares, creating a highly unstable situation. They knew that a modest increase in the stock price would quickly cascade into a series of margin calls that cannot possibly all be met. The hedge funds are being forced to buy back the shares, bidding the stock price higher and higher as they fight each other to grab the insufficient number of available shares.
Naked shorts are ILLEGAL. (The SEC just looks the other way.) Now it is biting the hedge funds in the ass.