Traders in meltdown as Reddit forum leaves hedge fund on the brink of bankruptcy
Reports of individuals crying and traders entering meltdown have surfaced after a Reddit forum called WallStreetBets waged a war against hedge funds who had shorted stock on gaming outlet GameStop.
Sellers were caught in a short squeeze as people in a fast-growing community forum pumped money into shares they had bet against, increasing its value by nearly 2,000 per cent in the past month in an act of defiance.
Melvin Capital continues to be particularly hard hit through the uprising, as has CitronResearch. The former has been instructed to close its position on GameStop after encountering devastating losses on a short position that pays out when the stock depreciates.
Open letter
Today an open letter has appeared on the WallStreetBets forum, explaining the explanation behind the move.
The resentment for Wall Street investment firms, particularly those that were betting billions of dollars decreasing of struggling businesses, stems from the Economic crisis of 2007 and 2008, it read.
“To Melvin Capital: you are a symbol of everything that I hated during that time,” user Ssauronn states.
“You're a strong who makes money off of exploiting a business and manipulating markets and media to your benefit. Your continued existence is a sharp reminder that the ones in charge of a lot hardship during the ’08 crisis were not punished.”
Meltdown
On the ground the reaction continues to be one of mass panic, according to the latest reports.
One portfolio manager in a hedge fund in Mayfair told Financial News London that “the retail people are targeting EVERY stock with a lot of short interest”.
“It is short-squeeze hell,” said another portfolio manager at a London hedge fund. “People are crying. Once every couple of years people get to learn once again the meaning of gamma squeeze,” he explained.
Elsewhere videos such as the one below happen to be doing the rounds on social networking, seemingly summing up the sentiment among investors.
It begs the question; have they finally got their comeuppance?
