Can you help me understand why this important. Seems like it means that there are people who have "sold" a bunch of stock to clients, but are actually in possession of those stocks and are now holding the short stick?
To short a stock, you "borrow" shares from the people who own them and pay interest on those shares, like a loan, but stock shares instead of money. You then sell those shares at the current price, and you will need to repurchase the shares later. (The assumption is, in the future stock price will be much lower, so it is worth paying interest in the meantime since you are selling at $5 but can buy the shares back later for $2 for example) The people who shorted game stop shorted so many shares that now, they have to buy back so many shares that the law of supply and demand, there is not enough supply of shares, so the price rises. Because they borrowed shares and are paying interest, they need to buy the shares NO MATTER THE PRICE. Since the risk is infinite as the price rises the brokers/creditors will force the short sellers to buy the stock no matter the price. Basically shorts getting fukt, so hard.
Can you help me understand why this important. Seems like it means that there are people who have "sold" a bunch of stock to clients, but are actually in possession of those stocks and are now holding the short stick?
To short a stock, you "borrow" shares from the people who own them and pay interest on those shares, like a loan, but stock shares instead of money. You then sell those shares at the current price, and you will need to repurchase the shares later. (The assumption is, in the future stock price will be much lower, so it is worth paying interest in the meantime since you are selling at $5 but can buy the shares back later for $2 for example) The people who shorted game stop shorted so many shares that now, they have to buy back so many shares that the law of supply and demand, there is not enough supply of shares, so the price rises. Because they borrowed shares and are paying interest, they need to buy the shares NO MATTER THE PRICE. Since the risk is infinite as the price rises the brokers/creditors will force the short sellers to buy the stock no matter the price. Basically shorts getting fukt, so hard.