Reddit Triggers Massive Short Squeezes Beyond GameStop
Amateur traders on the Reddit forum WallStreetBets cause extreme volatility by targeting heavily shorted stocks like AMC and Tootsie Roll in a coordinated effort against hedge funds.
Participants on the Reddit message board WallStreetBets expand their feud with hedge funds by pouring into heavily shorted stocks beyond GameStop. Companies like AMC Entertainment, Tootsie Roll Industries, Koss, and Bed Bath & Beyond experience extreme stock market volatility as everyday traders band together to force short squeezes against institutional investors.
A short squeeze occurs when short sellers are forced to buy shares to exit their positions, driving the stock price upward at a breathtaking pace. This coordinated buying pushes GameStop to a $25 billion market capitalization, rivaling the much larger and profitable retailer Best Buy, while AMC reaches a valuation five times higher than its pre-pandemic level.
This massive stock movement remains entirely disconnected from the underlying fundamentals of these companies, as seen with money-losing GameStop and the defunct Blockbuster's liquidation company seeing enormous gains. Despite these businesses facing severe financial struggles and declining revenues, the sheer volume of shares held short makes them highly ripe for continued dramatic price swings.