GME Endgame: The War Between Melvin Capital and Wall Street Bets
And why the future of American capitalism may hang in the balance
** UPDATES AT BOTTOM OF ARTICLE! (12:40 EST, 1/28)**
As I write this first line, it is 1:41 P.M. EST on Tuesday, January 26th, and GME — the stock of retail video game seller GameStop — is flying past $115. It was at $100 at the start of the hour, $88.56 at the start of the day. That’d be great news for the average investor on a long call, but today is anything but average. For the traders driving this surge, they want $1000 per GME or nothing, total victory or crushing defeat. They just might pull it off, and they only need to bankrupt a multi-billion-dollar hedge fund to do it.
If you haven’t heard of this yet, let me set the stage:
GameStop has seen years of declining sales, due primarily to online retailers like Amazon and the rise in popularity of game downloads on new-gen systems. Amid the COVID-19 pandemic driving down retail sales, many people have been expecting the company to go the route of Blockbuster Video and fold completely. Among those betting on GameStop’s failure is a 12.5-billion-dollar, NY-based hedge fund called Melvin Capital. They placed an insane number of leveraged short calls on GME, until the stock had a staggering 140% short ratio.
