Some new light shed on GameStop frenzy

A congressional hearing held last Thursday into the GameStop share trading frenzy cast some light, albeit limited, on previously little reported but significant practices in the operations of Wall Street.

The inquiry by the House Financial Services Committee involved questioning of those associated with the GameStop market surge last month, which involved a “short squeeze” on hedge funds, most notably Melvin Capital, which had shorted the stock.

Shorting involves borrowing the shares of a company and then selling them with the aim of forcing down the price, whereupon the seller buys the shares at the lower price and returns them to the lender, making a profit on the transaction.

GameStop was a target of the squeeze because it had been heavily sold by short

— source | Nick Beams | 22 Feb 2021

Nullius in verba

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