By now you’ve probably heard of Reddit and Gamestop. This fiasco has the entire stock market turned upside down, and if you’re confused about how it all works, you’re not alone. 

It all started with r/wallstreetbets pooling their resources to buy stock in Gamestop. Their resources are by no means small, with 9.7 million people in the group. 

A Redditor who goes by u/DeepFuckingValue began the trend. He currently has about $40 million invested in Gamestop stock, and he has no plans of selling. 

Let’s look at why everyone has taken notice of the “squeeze” that Reddit has put on investors.

What Is Shorting a Stock?

Shorting is when an investor borrows stock from a company (Gamestop) and then sells it immediately. The trick is that the investor promises to buy back the stock to pay back the company. Here, the investor is betting that the company’s stock price will drop. If it does, they will buy the stock at that lower price and give it back to the company. Boom, profit. 

So, What’s the Problem? 

The issue comes up when Reddit collectively buys massive amounts of stock and drives the price of Gamestop up. Now, if investors try to buy stock to repay their debt, they’ll buy at a price way above their original price. This causes them to lose money, and this is no chump change. They have billions of dollars sunk into Gamestop, and they have to repay it at some point.

Right now, investors are hoping that the people who have driven up the stock’s prices will sell. This way, the price will go back down and they can make a profit again.

Gamestop is currently sitting at around $190 a share, a significant increase from below $20 in January. Can Reddit hold onto their stock and eventually bankrupt investors, or will they sell for major profit? Only time will tell.