GameStop Short Sellers Flee As Short Interest Drops By $880 Million In 2 Weeks
Ramish Zafar, 30 June 2021
Reddit forum discussions and coordinated trades have been rooted in the community’s disdain for so-called “toxic market participants”. These toxic players tend to be hedge funds and a few others on Wall Street who make sizable bearish bets against certain stocks through naked shorting.
This practice, considered illegal after the subprime crisis in 2008, consists of borrowing shares to sell short, but without these shares existing. This is only possible in the very short term and due to technical loopholes in trading, as transactions take days to clear the system.
GameStop Short Interest Drops By 33% In Two Weeks After Short Sellers Recover $840 Million Of Losses
At the start of this month, GameStop’s shares opened at $249, and after they jumped to $302 in the second week, they have been on a downward spiral, resulting in an opening price of $209 today. The price drops helped the investors who bet against the company by selling its shares ‘short’ on the market as, before the end of the second week, they had accumulated losses worth $12 billion over the course of the year. Following the price drops, the short sellers profited slightly by recovering $840 million.
