The GameStop short squeeze, explained: how a crowd of individual investors briefly beat Wall Street's biggest bets.

Originally reported as: “Retail trading frenzy sends video game retailer's shares soaring as hedge funds scramble to cover losses”

In January 2021, shares of GameStop, a struggling video game retailer, rocketed from roughly $20 to an intraday peak of almost $500, after a large community of individual investors organized largely on the Reddit forum r/wallstreetbets and began buying the stock en masse. GameStop had been one of the most heavily 'shorted' stocks on Wall Street, meaning large hedge funds had bet heavily that its price would fall. As the price rose instead, those hedge funds were forced to buy shares to close out their losing bets, which pushed the price up even further in a feedback loop known as a short squeeze. One hedge fund, Melvin Capital, lost billions of dollars and needed an emergency cash injection to stay afloat, while the trading app Robinhood restricted purchases of GameStop shares during the peak frenzy, a decision that sparked outrage and congressional hearings.