Even after Cohen joined the board and the stock price began to rebound, a handful of hedge funds and other institutional investors continued to short-sell GME stock. This was likely an attempt by large players to out-muscle amateur traders and induce panic selling. The WallStreetBets Reddit community saw this as an opportunity to push back against the financial elite and decided to whip up a buying frenzy in the hopes of creating a major short squeeze. A short squeeze might sound complicated but it’s actually a relatively straightforward process. When institutional investors short-sell a stock, what they actually do is borrow a number of shares they believe will drop in value, sell them at the highest price possible and try to buy them back later at a lower price. If they’re successful, they hand the initial borrowed amount back and pocket the difference.
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