Reuters is reporting massive losses for hedge funds that shorted GameStop (GME) but were thwarted by retail traders on Reddit who decided to put a turd in their punch bowl by driving the price way up, leaving short-sellers holding the bag.
Short-sellers are sitting on estimated losses of $70.87 billion from their short positions in U.S. companies so far this year, data from financial data analytics firm Ortex showed on Thursday.
The hefty losses come as shares of highly-shorted GameStop jumped more than 1,000% in the past week without a clear business reason, forcing short-sellers to buy back into the stock to cover potential losses — defined as a short-squeeze — while retail investors then piled in to benefit from the surge.
Heavy hedge fund losses are exactly what many of the retail traders claim to want, seeing it as payback for the 2008 bailouts after the housing crash that left many Americans homeless while Wall Street flourished, fat on government hand-outs.
While many have criticized the retail traders for using the market as a revenge tool, so far it seems to be working. To get caught up on the backstory read the following:
How a Bunch of Redditors with $600 Stimulus Checks Outsmarted Wall Street Hedge-Fund Managers
Robinhood Protecting the Rich? GameStop Buys Halted in Massive Game Of High-Stakes Chicken
What Is Happening? AOC, Trump Jr., and Ted Cruz Suddenly Agree on Something